UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2019
or
¨
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)

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 ý    No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes ý    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
ý
 
 
 
 
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 ý
As of February 5, 2020, the Company had 86,741,096 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, 2019
TABLE OF CONTENTS
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 
 




PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS

3



Digital Turbine, Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except par value and share amounts)
 
 
December 31, 2019
 
March 31, 2019
 
 
(Unaudited)
 
 
ASSETS
 
 
 
 
Current assets
 
 
 
 
Cash
 
$
33,714

 
$
10,894

Restricted cash
 
165

 
165

Accounts receivable, net of allowances of $1,101 and $895, respectively
 
26,694

 
22,707

Prepaid expenses and other current assets
 
2,141

 
1,331

Current assets held for disposal
 
1,527

 
2,026

Total current assets
 
64,241

 
37,123

Property and equipment, net
 
5,116

 
3,430

Right-of-use assets
 
2,029

 

Deferred tax assets
 

 
40

Goodwill
 
42,268

 
42,268

TOTAL ASSETS
 
$
113,654

 
$
82,861

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
Current liabilities
 
 
 
 
Accounts payable
 
$
20,820

 
$
14,912

Accrued license fees and revenue share
 
16,264

 
16,205

Accrued compensation
 
3,296

 
2,441

Warrant liability
 
6,300

 

Other current liabilities
 
4,285

 
826

Current liabilities held for disposal
 
3,431

 
3,924

Total current liabilities
 
54,396

 
38,308

Warrant liability
 

 
8,013

Other non-current liabilities
 
2,007

 
182

Total liabilities
 
56,403

 
46,503

Stockholders' equity
 
 
 
 
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

Common stock
 
 
 
 
$0.0001 par value: 200,000,000 shares authorized; 87,057,421 issued and 86,322,965 outstanding at December 31, 2019; 82,354,940 issued and 81,620,485 outstanding at March 31, 2019
 
10

 
10

Additional paid-in capital
 
353,968

 
332,793

Treasury stock (754,599 shares at December 31, 2019 and March 31, 2019)
 
(71
)
 
(71
)
Accumulated other comprehensive loss
 
(720
)
 
(356
)
Accumulated deficit
 
(296,036
)
 
(296,118
)
Total stockholders' equity
 
57,251

 
36,358

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
 
$
113,654

 
$
82,861

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

4



Digital Turbine, Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Income / (Loss) (Unaudited)
(in thousands, except per share amounts)
 
 
Three months ended December 31,
 
Nine months ended December 31,
 
 
2019
 
2018
 
2019
 
2018
Net revenues
 
$
36,016

 
$
30,411

 
$
99,364

 
$
76,377

Cost of revenues
 
 
 
 
 
 
 
 
License fees and revenue share
 
21,576

 
19,195

 
59,997

 
50,213

Other direct costs of revenues
 
400

 
538

 
1,022

 
1,553

Total cost of revenues
 
21,976

 
19,733

 
61,019

 
51,766

Gross profit
 
14,040

 
10,678

 
38,345

 
24,611

Operating expenses
 
 
 
 
 
 
 
 
Product development
 
2,783

 
2,428

 
8,312

 
8,174

Sales and marketing
 
2,815

 
1,962

 
7,534

 
5,711

General and administrative
 
4,310

 
3,832

 
12,212

 
9,215

Total operating expenses
 
9,908

 
8,222

 
28,058

 
23,100

Income from operations
 
4,132

 
2,456

 
10,287

 
1,511

Interest and other income / (expense), net
 
 
 
 
 
 
 
 
Interest income / (expense), net
 
59

 
(194
)
 
118

 
(648
)
Foreign exchange transaction gain / (loss)
 

 
(2
)
 

 
7

Change in fair value of convertible note embedded derivative liability
 

 
(1,476
)
 

 
1,096

Change in fair value of warrant liability
 
(870
)
 
(1,651
)
 
(10,601
)
 
845

Loss on extinguishment of debt
 

 
(10
)
 

 
(25
)
Other income / (expense)
 
(19
)
 
(43
)
 
455

 
(169
)
Total interest and other income / (expense), net
 
(830
)
 
(3,376
)
 
(10,028
)
 
1,106

Income / (loss) from continuing operations before income taxes
 
3,302

 
(920
)
 
259

 
2,617

Income tax provision
 
41

 
216

 
6

 
157

Income / (loss) from continuing operations, net of taxes
 
3,261

 
(1,136
)
 
253

 
2,460

Income / (loss) from discontinued operations
 
65

 
(212
)
 
(171
)
 
(1,612
)
Net income / (loss) from discontinued operations, net of taxes
 
65

 
(212
)
 
(171
)
 
(1,612
)
Net income / (loss)
 
$
3,326

 
$
(1,348
)
 
$
82

 
$
848

Other comprehensive loss
 
 
 
 
 
 
 
 
Foreign currency translation adjustment
 
(44
)
 
(5
)
 
(364
)
 
(5
)
Comprehensive income / (loss)
 
$
3,282

 
$
(1,353
)
 
$
(282
)
 
$
843

Basic and diluted net income / (loss) per common share
 
 
 
 
 
 
 
 
Continuing operations
 
$
0.04

 
$
(0.01
)
 
$

 
$
0.03

Discontinued operations
 

 

 

 
(0.02
)
Net income / (loss)
 
$
0.04

 
$
(0.01
)
 
$

 
$
0.01

Weighted-average common shares outstanding, basic
 
85,876

 
77,645

 
83,869

 
76,977

Weighted-average common shares outstanding, diluted
 
92,472

 
77,645

 
89,759

 
79,371

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

5



Digital Turbine, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
 
 
Nine months ended December 31,
 
 
2019
 
2018
Cash flows from operating activities
 
 

 
 

Net income from continuing operations, net of taxes
 
$
253

 
$
2,460

Adjustments to reconcile net income from continuing operations to net cash provided by / (used in) operating activities:
 
 
 
 
Depreciation and amortization
 
1,484

 
2,145

Loss on disposal of fixed assets
 
4

 

Change in allowance for doubtful accounts
 
206

 
425

Amortization of debt discount and debt issuance costs
 

 
251

Stock-based compensation
 
2,044

 
1,416

Stock-based compensation for services rendered
 
470

 
365

Change in fair value of convertible note embedded derivative liability
 

 
(1,096
)
Change in fair value of warrant liability
 
10,601

 
(845
)
Loss on extinguishment of debt
 

 
25

(Increase) / decrease in assets:
 
 
 
 
Accounts receivable
 
(4,193
)
 
(7,626
)
Deferred tax assets
 
40

 
157

Prepaid expenses and other current assets
 
(829
)
 
(561
)
Right-of-use assets
 
(2,029
)
 

Increase / (decrease) in liabilities:
 
 
 
 
Accounts payable
 
5,908

 
2,657

Accrued license fees and revenue share
 
59

 
3,258

Accrued compensation
 
855

 
(1,345
)
Other current liabilities
 
3,459

 
788

Other non-current liabilities
 
1,823

 
55

Net cash provided by operating activities - continuing operations
 
20,155

 
2,529

Net cash used in operating activities - discontinued operations
 
(145
)
 
(3,436
)
Net cash provided by / (used in) operating activities
 
20,010

 
(907
)

 
 
 
 
Cash flows from investing activities
 
 

 
 

Capital expenditures
 
(3,179
)
 
(1,781
)
Net cash used in investing activities
 
(3,179
)
 
(1,781
)

 
 
 
 
Cash flows from financing activities
 
 

 
 

Options and warrants exercised
 
6,353

 
223

Repayment of debt obligations
 

 
(50
)
Net cash provided by financing activities
 
6,353

 
173

 
 
 
 
 
Effect of exchange rate changes on cash
 
(364
)
 
(5
)
 
 
 
 
 
Net change in cash
 
22,820

 
(2,520
)
 
 
 
 
 
Cash and restricted cash, beginning of period
 
11,059

 
13,051

 
 
 
 
 
Cash and restricted cash, end of period
 
$
33,879

 
$
10,531

 
 
 
 
 
Supplemental disclosure of cash flow information
 
 

 
 

Interest paid
 
$

 
$
290

Supplemental disclosure of non-cash financing activities
 
 
 
 
Common stock of the Company issued for extinguishment of debt
 
$

 
$
1,190

Cashless exercise of warrants to purchase common stock of the Company
 
$
791

 
$

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

6



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 loss
 

 

 

 

 

 

 

 

 
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 consolidated financial statements.

7



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, 2018
 
76,108,823

 
$
10

 
100,000

 
$
100

 
754,599

 
$
(71
)
 
$
318,066

 
$
(325
)
 
$
(290,108
)
 
$
27,672

Net loss
 

 

 

 

 

 

 

 

 
484

 
484

Stock-based compensation
 

 

 

 

 

 

 
500

 

 

 
500

Stock-based compensation for services rendered
 

 

 

 

 

 

 
85

 

 

 
85

Options exercised
 
50,000

 

 

 

 

 

 
39

 

 

 
39

Balance at June 30, 2018
 
76,158,823

 
10

 
100,000

 
100

 
754,599

 
(71
)
 
318,690

 
(325
)
 
(289,624
)
 
28,780

Net loss
 

 

 

 

 

 

 

 

 
1,712

 
1,712

Foreign currency translation
 

 

 

 

 

 

 

 
2

 

 
2

Conversion of convertible notes to equity
 
670,878

 

 

 

 

 

 
948

 

 

 
948

Stock-based compensation
 
306,656

 

 

 

 

 

 
602

 

 

 
602

Options exercised
 
111,200

 

 

 

 

 

 
121

 

 

 
121

Balance at September 30, 2018
 
77,247,557

 
10

 
100,000

 
100

 
754,599

 
(71
)
 
320,361

 
(323
)
 
(287,912
)
 
32,165

Net loss
 

 

 

 

 

 

 

 

 
(1,348
)
 
(1,348
)
Conversion of convertible notes to equity
 
168,773

 

 

 

 

 

 
241

 

 

 
241

Stock-based compensation
 

 

 

 

 

 

 
632

 

 

 
632

Options exercised
 
55,583

 

 

 

 

 

 
63

 

 

 
63

Balance at December 31, 2018
 
77,471,913

 
$
10

 
100,000

 
$
100

 
754,599

 
$
(71
)
 
$
321,297

 
$
(323
)
 
$
(289,260
)
 
$
31,753

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

8



Digital Turbine, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Unaudited)
December 31, 2019
(in thousands, except share and per share amounts)
1.    Description of Business
Digital Turbine, Inc., through its subsidiaries, innovates at the convergence of media and mobile communications, delivering an end-to-end platform solution for mobile operators, application developers, device original equipment manufacturers ("OEMs"), and other third parties to enable them to effectively monetize mobile content and generate higher-value user acquisition. Through December 31, 2019, Digital Turbine has delivered over 3 billion application pre-loads on over 369 million devices across thirty-five Operator and OEM ("O&O") partnerships. The Company operates this business as one reportable segment – Advertising.
The Company's Advertising segment operates the O&O business, an advertiser solution for unique and exclusive carrier and OEM inventory, which is comprised of services including:
Ignite™ ("Ignite"), a software platform with targeted media delivery and management capabilities, and
Other recurring and life-cycle products, features, and professional services delivered on the Ignite platform.
Prior to the sale of the Advertiser and Publisher ("A&P") Assets described below under Note 4. "Discontinued Operations," the Advertising reporting segment also included the A&P Assets as an operating segment within Advertising.
With global headquarters in Austin, Texas and offices in Durham, North Carolina; San Francisco, California; Singapore; and Tel Aviv, Israel, Digital Turbine’s solutions are available worldwide.
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”), and Digital Turbine Media, Inc. (“DT Media”), which we acquired on March 6, 2015. We refer to all of the Company's subsidiaries collectively as "wholly-owned subsidiaries."
2.    Liquidity
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("US GAAP"), which contemplate continuation of the Company as a going concern.

Our primary sources of liquidity have historically been cash from operations, issuance of common stock, preferred stock, and debt. As of December 31, 2019, we had cash, including restricted cash, totaling approximately $33,879.

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 Agreement with the Bank. The Credit Agreement, as amended, provides for up to a $20,000 total revolving credit facility, subject to draw limitations derived from current levels of eligible domestic receivables. Please refer to Note 8. "Debt" for more details.
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 Credit Agreement. In addition, the Company may raise additional capital through future equity or, subject to restrictions contained in the 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.

9



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 2020 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 has sufficient cash and capital resources to continue to operate its business for at least twelve months from the issuance 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
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 U.S. Securities and Exchange Commission ("SEC") in Digital Turbine, Inc.'s Annual Report on Form 10-K for the fiscal year ended March 31, 2019. 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. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments of a normal recurring nature considered necessary to fairly state the financial position of Digital Turbine, Inc. and its consolidated subsidiaries at December 31, 2019, the results of their operations and corresponding comprehensive income / (loss) for the three and nine months ended December 31, 2019 and 2018, and their cash flows for the nine months ended December 31, 2019 and 2018. 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. The results of operations for the interim period are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2020.
Recently Issued Accounting Pronouncements
The significant accounting policies and recent accounting pronouncements were described in Note 4 of the consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended March 31, 2019. There have been no significant changes in or updates to the accounting policies since March 31, 2019. 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 February 2016, the FASB issued Account Standards Update ("ASU") 2016-02: Leases (Topic 842). This update changes lessee accounting to reflect the financial liability and right-of-use assets that are inherent to leasing an asset on the balance sheet. This guidance is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. As such, the Company adopted this standard during our quarter ended June 30, 2019 using the modified retrospective method, such that we will account for leases that commenced before the effective date of ASU No. 2016-02 in accordance with previous GAAP unless the lease is modified, except we will recognize right-of-use assets and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. The impact of adoption resulted in a gross-up of the Consolidated Balance Sheet with the creation of a right-of-use asset and a corresponding financial liability partially offset by the relief of other liability accounts related to the change in accounting standard. The impact on the Consolidated Statements of Operations and Comprehensive Income / (Loss) was negligible. The adoption of this standard did not have a material net impact on the Company's consolidated results of operations, financial condition, or cash flows. Please refer to Note 7. "Leases" for details.

10



Revenue from Contracts with Customers
The Company adopted Accounting Standards Codification ("ASC") 606 on April 1, 2018, and ASC 606 is effective from the period beginning April 1, 2016 using the modified retrospective method for all contracts not completed as of the effective date. For contracts that were modified before the effective date, the Company reflected the aggregate effect of all modifications when identifying performance obligations and allocating transaction price in accordance with practical expedient ASC 606-10-65-1-(f)-4, which did not have a material effect on the adjustment to accumulated deficit. The adoption of ASC 606 represents a change in accounting principle that will more closely align revenue recognition with the delivery of the Company's services and will provide financial statement readers with enhanced disclosures. In accordance with ASC 606, revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services.
To achieve this core principle, the Company applied the following five steps:
1) Identify the contract with a customer
A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.
2) Identify the performance obligations in the contract
Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company must apply judgment to determine whether promised services are capable of being distinct and distinct in the context of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation.
3) Determine the transaction price
The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the customer. None of the Company's contracts contain financing or variable consideration components.
4) Allocate the transaction price to performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis. The Company determines standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.
5) Recognize revenue when or as the Company satisfies a performance obligation
The Company satisfies performance obligations at a point in time as discussed in further detail under "Disaggregation of Revenue" below. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer.


11



Disaggregation of Revenue
All of the Company's performance obligations, and associated revenue, are generally transferred to customers at a point in time.
O&O Services
The Company’s Advertising business consists of one operating segment (O&O), an advertiser solution for unique and exclusive carrier and OEM inventory, which is comprised of services including:
Ignite, a mobile application management software that enables mobile operators and OEMs to control, manage, and monetize applications installed at the time of activation and over the life of a mobile device. Ignite allows mobile operators and OEMs to personalize the application activation experience for customers and monetize their home screens via Cost-Per-Install or CPI arrangements, Cost-Per-Placement or CPP arrangements, and/or Cost-Per-Action or CPA arrangements with third party advertisers. There are several different delivery methods available to operators and OEMs on first boot of the device: Wizard, Dynamic Installs, or Software Development Kit ("SDK"). Optional notification features are available throughout the life-cycle of the device, providing operators and OEMs additional opportunity for advertising revenue streams.

Other products and professional services directly related to the Ignite platform.
Carriers and OEMs
The Company generally offers these services under a vendor contract revenue share model or under a customer contract per device license fee model with carriers and OEMs for a two to four year software as a service ("SaaS") license agreement. These agreements typically include the following services: the access to the SaaS platform, hosting fees, solution features, and general support and maintenance. The Company has concluded that each promised service is delivered concurrently with all other promised service over the contract term and, as such, has concluded these promises are a single performance obligation that includes a series of distinct services that have the same pattern of transfer to the customer. Consideration for the Company’s license arrangements consist of fixed and usage based fees, invoiced monthly or quarterly. The Company's contracts do not include advance non-refundable fees. Monthly license fees are based on the number of devices on a per device license fee basis. Monthly hosting and maintenance fees are generally fixed. These monthly fees are subject to a service level agreement ("SLA"), which requires that the services are available to the customer based on a predefined performance criteria. If the services do not meet these criteria, monthly fees are subject to adjustment or refund. The Company satisfies its performance obligation by providing access to its SaaS platform over time and processing transactions. For non-usage based fees, the period of time over which the Company performs its obligations is inherently commensurate with the contract term. The performance obligation is recognized on time elapsed basis, by month for which the services are provided. For usage-based fees, revenue is recognized in the month in which the Company provides the usage to the customer.
Third-Party Advertisers
The Company generally offers these services under a customer contract Cost-Per-Install or CPI arrangements, Cost-Per-Placement or CPP arrangements, and/or Cost-Per-Action or CPA arrangements with third-party advertisers and developers, as well as advertising aggregators, generally in the form of insertion orders that specify the type of arrangement (as detailed above) at particular set budget amounts/restraints. These advertiser customer contracts are generally short term in nature at less than one year as the budget amounts are typically spent in full within this time period. These agreements typically include the delivery of applications through partner networks, defined as carriers or OEMs, to home screens of devices. The Company has concluded that the delivery of the advertisers application is delivered at a point in time and, as such, has concluded these deliveries are a single performance obligation. The Company invoices fees which are generally variable based on the arrangement, which would typically include the number of applications delivered at a specified price per application. For applications delivered, revenue is recognized in the month in which the Company delivers the application to the end consumer.

12



Professional Services
The Company offers professional services that support the implementation of its Ignite platform for carriers and OEMs, including technology development and integration services. These contracts generally include delivery and integration of the technology development product and revenue is recognized when formal acceptance is confirmed by the customer. Services are billed in one lump sum. For the majority of these contracts, for which the Company has the right to invoice the customer in an amount that directly corresponds with the value to the customer of the Company's performance to date, the Company recognizes revenue based on the amount billable to the customer in accordance with practical expedient ASC 606-10-55-18.
Costs to Obtain and Fulfill a Contract
The Company capitalizes commission expenses paid to internal sales personnel that are incremental to obtaining customer contracts. These costs are deferred in “prepaid expenses and other current assets,” net of any long-term portion included in “other non-current assets." The judgments made in determining the amount of costs incurred include whether the commissions are in fact incremental and would not have occurred absent the customer contract. Costs to obtain a contract are amortized as sales and marketing expense on a straight line basis over the expected period of benefit. These costs are periodically reviewed for impairment. The Company has evaluated related activity and have determined the costs to obtain a contract to be immaterial and do not require disclosure.
The Company capitalizes costs incurred to fulfill its contracts that i) relate directly to the contract, ii) are expected to generate resources that will be used to satisfy the Company’s performance obligation under the contract and iii) are expected to be recovered through revenue generated under the contract. Contract fulfillment costs are expensed to cost of revenue as the Company satisfies its performance obligations by transferring the service to the customer. These costs, which are classified in “prepaid expenses and other current assets,” net of any long term portion included in “other non-current assets,” principally relate to direct costs that enhance resources under the Company’s demand response contracts that will be used in satisfying future performance obligations. The Company has evaluated related activity and has determined the costs to fulfill a contract to be immaterial and do not require disclosure.

Financial Statement Impact of Adopting ASC 606
The Company adopted ASC 606 using the modified retrospective method. After applying the new guidance to all contracts with customers that were not completed as of April 1, 2017, the Company has determined no changes in revenues or contract costs for which an adjustment would be required to accumulated deficit as of the adoption date. As a result of applying the modified retrospective method to adopt the new revenue guidance, the Company determined that the impact of adoption was not material and that no adjustments would need to be made to accounts to the consolidated balance sheet as of April 1, 2017.
Concentrations of Credit Risk
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, 2019, one major customer represented approximately 20.9% of the Company’s net accounts receivable balance. As of March 31, 2019, one major customer represented 25.7% 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, 2019, Verizon Communications Inc., primarily through its subsidiary Oath Inc., represented 14.4% and 17.7% of net revenues, respectively. During the three and nine months ended December 31, 2018, Oath Inc. represented 28.8% and 31.1% of net revenues, respectively.

13



With respect to partner revenue concentration, the Company partners with mobile carriers and OEMs to deliver applications on our Ignite platform through the carrier network. During the three and nine months ended December 31, 2019, Verizon Wireless, a carrier partner, generated 37.5% and 40.3%, respectively; AT&T Inc., a carrier partner, including its Cricket subsidiary, generated 29.8% and 30.9%, respectively; and America Movil Inc., a carrier partner, primarily through its subsidiary TracFone Wireless Inc., generated 12.4% and 10%, respectively, of our net revenues. During the three and nine months ended December 31, 2018, Verizon Wireless, a carrier partner, generated 43.7% and 47.6%, respectively; and AT&T Inc., a carrier partner, including its Cricket subsidiary, generated 38.5% and 38.4%, 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.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make certain estimates that impact the reported amounts in the consolidated financial statements and accompanying notes. 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 the facts and circumstances available at the time of filing. Actual results could differ materially from those estimates.
4.    Discontinued Operations
On April 29, 2018, the Company entered into two distinct disposition agreements with respect to selected 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 as of 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 disclosed in the Company’s Form 8-K filed on May 1, 2018 with the SEC. The transaction was completed on July 1, 2018. With the sale of these assets, the Company has 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, the Company has determined that the estimated earn out from the Pay Purchaser to be $0. As all the assets being transferred had been fully impaired prior to the closing of the transaction, the gain/loss on sale related to the Pay Agreement transaction was $0. Furthermore, the Company retained certain receivables and payables for content delivered for the benefit of the partner to the material contract, where these certain receivables and payables were all recognized prior to the closing of the Pay Agreement. These amounts are presented below as assets and liabilities held for disposal. As of December 31, 2019, the Company has determined there to be uncertainty surrounding the collectability of the receivables due to ongoing discussions with the business partner. If at a later date it is determined that the receivables recorded are not collectible due to disputes surrounding the content delivered, the related payables would likewise not be payable. At this time, the Company is negotiating settlement but does not have enough information to reasonably estimate which receivables and payables, if any, may be un-collectible and un-payable, respectively. The total net exposure to the Company if all of the remaining receivables and payables are determined to be un-collectible and un-payable, respectively, is immaterial. These assets and liabilities remain on our books as a component of discontinued operations as of December 31, 2019.

14



DT Media, a wholly-owned subsidiary of the Company, entered into an Asset Purchase Agreement (the “A&P Agreement”), dated as of 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 a period of three years, as disclosed in the Company’s Form 8-K filed on 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 has exited the operating segment of the business previously referred to as the A&P business, which was previously part of Advertising, the Company's sole continuing reporting unit. No gain or loss on sale was recognized related to this divestiture. All transferred assets and liabilities, with the exception of goodwill, were fully amortized prior to entering into the sale agreement. As the consideration given by the purchaser was already materially determined at March 31, 2018, goodwill was impaired to the estimated future cash flows of the divested business, which was effectively the purchase price.
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,
 
 
2019
 
2018
 
2019
 
2018
Net revenues
 
$

 
$
3

 
$

 
$
3,880

Total cost of revenues
 
(102
)
 

 
(102
)
 
3,070

Gross profit
 
102

 
3

 
102

 
810

Product development
 

 
37

 
62

 
703

Sales and marketing
 

 
7

 

 
350

General and administrative
 
37

 
160

 
122

 
1,212

Income / (loss) from operations
 
65

 
(201
)
 
(82
)
 
(1,455
)
Interest and other income / (expense), net
 

 
(11
)
 
(89
)
 
(157
)
Income / (loss) from discontinued operations before income taxes
 
65

 
(212
)
 
(171
)
 
(1,612
)
Income / (loss) from discontinued operations, net of taxes
 
65

 
(212
)
 
(171
)
 
(1,612
)
Comprehensive income / (loss)
 
$
65

 
$
(212
)
 
$
(171
)
 
$
(1,612
)
Basic and diluted net income / (loss) per common share
 
$

 
$

 
$

 
$
(0.02
)
Weighted-average common shares outstanding, basic
 
85,876

 
77,645

 
83,869

 
76,977

Weighted-average common shares outstanding, diluted
 
92,472

 
77,645

 
89,759

 
79,371


15



Details on assets and liabilities classified as held-for-disposal in the accompanying consolidated balance sheets are presented in the following table:
 
 
December 31, 2019
 
March 31, 2019
 
 
(Unaudited)
 
 
Assets held for disposal
 
 
 
 
Accounts receivable, net of allowances of $1,542 and $1,589, respectively
 
$
1,525

 
$
1,883

Property and equipment, net
 
2

 
143

Total assets held for disposal
 
$
1,527

 
$
2,026

 
 
 
 
 
Liabilities held for disposal
 
 
 
 
Accounts payable
 
$
2,926

 
$
3,158

Accrued license fees and revenue share
 
335

 
537

Accrued compensation
 
170

 
226

Other current liabilities
 

 
3

Total liabilities held for disposal
 
$
3,431

 
$
3,924


Assets and liabilities held for disposal as of December 31, 2019 and March 31, 2019 are classified as current since we expect the dispositions to be completed within one year.

The following table provides reconciling cash flow information for our discontinued operations:
 
 
Nine months ended December 31,
 
 
2019
 
2018
 
 
(Unaudited)
 
(Unaudited)
Cash flows from operating activities
 
 
 
 
Net loss from discontinued operations, net of taxes
 
$
(171
)
 
$
(1,612
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
 
19

 
247

Impairment of goodwill
 

 
309

Change in allowance for doubtful accounts
 
(47
)
 
(380
)
Loss on disposal of fixed assets
 
104

 

Stock-based compensation
 

 
37

(Increase) / decrease in assets:
 
 
 
 
Accounts receivable
 
405

 
5,164

Prepaid expenses and other current assets
 

 
95

Increase / (decrease) in liabilities:
 
 
 
 
Accounts payable
 
(232
)
 
(4,675
)
Accrued license fees and revenue share
 
(202
)
 
(1,991
)
Accrued compensation
 
(56
)
 
(302
)
Other current liabilities
 
35

 
(328
)
Cash used in operating activities
 
(145
)
 
(3,436
)
 
 
 
 
 
Cash used in discontinued operations
 
$
(145
)
 
$
(3,436
)

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5.    Accounts Receivable
 
 
December 31, 2019
 
March 31, 2019
 
 
(Unaudited)
 
 
Billed
 
$
13,314

 
$
11,833

Unbilled
 
14,481

 
11,769

Allowance for doubtful accounts
 
(1,101
)
 
(895
)
Accounts receivable, net
 
$
26,694

 
$
22,707

Billed accounts receivable represents amounts billed to customers that have yet to be collected. Unbilled accounts receivable represents revenue recognized but billed after period end. All unbilled receivables as of December 31, 2019 and March 31, 2019 are expected to be billed and collected within twelve months.
The Company recorded $56 and $184 of bad debt expense during the three and nine months ended December 31, 2019, respectively, and $59 and $229 of bad debt expense during the three and nine months ended December 31, 2018, respectively.
6.    Property and Equipment
 
 
December 31, 2019
 
March 31, 2019
 
 
(Unaudited)
 
 
Computer-related equipment
 
$
9,691

 
$
7,077

Furniture and fixtures
 
414

 
223

Leasehold improvements
 
623

 
558

Property and equipment, gross
 
10,728

 
7,858

Accumulated depreciation
 
(5,612
)
 
(4,428
)
Property and equipment, net
 
$
5,116

 
$
3,430

Depreciation expense was $540 and $1,484 for the three and nine months ended December 31, 2019, respectively, and $374 and $1,139 for the three and nine months ended December 31, 2018, respectively. Depreciation expense for the three and nine months ended December 31, 2019 includes $140 and $462, respectively, related to internal-use assets included in general and administrative expense, and $400 and $1,022, 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 months ended December 31, 2018 includes $170 and $591, respectively, related to internal-use assets included in general and administrative expense, and $204 and $548, respectively, related to internally-developed software to be sold, leased, or otherwise marketed included in other direct costs of revenue.

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7.    Leases
The Company has entered into various non-cancelable operating lease agreements for certain offices. These leases currently have lease periods expiring between fiscal years 2024 and 2025. The lease agreements may include one 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 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 are detailed below.
Schedule, by fiscal year, of maturities of lease liabilities as of:
 
 
December 31, 2019
 
 
(Unaudited)
Remainder of fiscal year 2020
 
$
169

Fiscal year 2021
 
688

Fiscal year 2022
 
705

Fiscal year 2023
 
723

Fiscal year 2024
 
520

Thereafter
 
203

Total undiscounted cash flows
 
3,008

(Less imputed interest)
 
(368
)
Present value of lease liabilities
 
$
2,640


The current portion of our lease liabilities, payable within the next 12 months, is included in other current liabilities and the long-term portion of our lease liabilities is included in other non-current liabilities on our Consolidated Balance Sheets.

Associated with this financial liability, the Company has recorded a right-of-use asset of $2,029, which is calculated using the present value of lease liabilities less any lease incentives received from our landlords and any deferred rent liability balance as of the date of implementation. The discount rate used to calculate the imputed interest above is 6.00% and the weighted-average remaining lease term is 4.31 years.
8.    Debt
Convertible Notes
On September 28, 2016, the Company sold to BTIG, LLC (the "Initial Purchaser") $16,000 aggregate principal amount of 8.75% convertible notes maturing on September 23, 2020 (the "Notes"), unless converted, repurchased, or redeemed in accordance with their terms prior to such date. The $16,000 aggregate principal received from the issuance of the Notes was initially allocated between long-term debt of $11,084, convertible note embedded derivative liability of $3,693 (see Note 9. "Fair Value Measurements" for more information), and warrant liability of $1,223 (see Note 9. "Fair Value Measurements" for more information), within the consolidated balance sheet. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the liability. Fair value of the Notes was determined using the residual method of accounting whereby, first, a portion of the proceeds from the issuance of the Notes was allocated to derivatives embedded in the Notes and the warrants issued in connection with the issuance of the Notes, and the proceeds so allocated were accounted for as a convertible note embedded derivative liability and warrant liability, respectively (see Note 9. "Fair Value Measurements" for more information), and second, the remainder of the proceeds from the issuance of the Notes was allocated to the convertible notes, which resulted in an original-issue debt discount of $4,916. At the close of the issuance of the Notes on September 28, 2016, the Company incurred $1,700 in debt issuance costs directly related to the issuance of the Notes, which, in accordance with ASU 2015-03, the Company recorded as a direct reduction to the face value of the Notes and amortized over the life of the Notes as a component of interest expense on the Consolidated Statements of Operations and Comprehensive Income / (Loss). During the three months ended December 31, 2016 the Company further incurred $212 in costs directly associated with the issuance of the Notes for the preparation and filing of a registration statement on Form S-1 to register the underlying common stock related to the Notes issued and related warrants issued along with the Notes. This was required to be done in accordance with the terms of the Indenture (as defined below).

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The Company sold the Notes to the Initial Purchaser at a purchase price of 92.75% of the principal amount. The initial purchaser also received an additional 250,000 warrants on the same terms as the warrants issued with the Notes (as detailed below) and has the right to receive 2.5% of any cash consideration received by the Company in connection with a future exercise of any of the warrants issued with the Notes, further noting that this liability has been accrued and is immaterial. The Notes were issued under an Indenture dated September 28, 2016, as amended and supplemented (the "Indenture"), between Digital Turbine, Inc., US Bank National Association, as trustee, and certain wholly-owned subsidiaries of the Company, specifically, DT USA, DT Media, DT EMEA, and DT APAC (collectively referred to as the "Guarantors"). The Notes were senior unsecured obligations of the Company and bore interest at a rate of 8.75% per year, payable semiannually in arrears on March 15th and September 15th of each year, beginning on March 15, 2017. The Notes were unconditionally guaranteed by the Guarantors as to the payment of principal, premium, if any, and interest on a senior unsecured basis. The Notes were issued with an initial conversion price equal to $1.364 per share of the Company's common stock, subject to proportional adjustment for adjustments to outstanding common stock and anti-dilution provisions in case of dividends or distributions, stock split or combination, or if the Company issued or sold shares of common stock at a price per share less than the conversion price on the trading day immediately preceding such issuance or sale.
Each purchaser of the Notes also received warrants to purchase 256.60 shares of the Company's common stock for each $1 in Notes purchased, or up to 4,105,600 warrants in the aggregate, in addition to the 250,000 warrants issued to the Initial Purchaser, as described above. The warrants were issued under a Warrant Agreement (the "Warrant Agreement"), dated as of September 28, 2016, between Digital Turbine, Inc. and US Bank National Association as the warrant agent.
The warrants were immediately exercisable on the date of issuance at an initial exercise price of $1.364 per share and will expire on September 23, 2020. The exercise price is subject to proportional adjustment for adjustments to outstanding common stock and anti-dilution provisions in case of dividends or distributions, stock split or combination, or if the Company issues or sells shares of common stock at a price per share less than the conversion price on the trading day immediately preceding such issuance or sale. Certain caps on the number of shares that could be issued under the Notes and the Warrants were effectively lifted by our stockholders approving the full issuance of all potentially issuable shares at our January 2017 annual meeting of stockholders, and again at our January 2018 annual meeting of stockholders in respect of our May 2017 supplemental indenture.
In the event of a fundamental change, as set forth in the Warrant Agreement, the holders can elect to exercise their warrants or to receive an amount of cash based on a Black-Scholes calculation of the value of such warrants.
The Company received net cash proceeds of $14,316 after deducting the Initial Purchaser's discounts and commissions and the estimated offering expenses payable by Digital Turbine. The net proceeds from the issuance of the Notes were used to repay $11,000 of secured indebtedness, retiring such debt in its entirety, and were otherwise used for general corporate purposes and working capital.
In May 2017, the Company entered a supplemental indenture and warrant amendment, described in its Current Report on Form 8-K filed May 24, 2017, and as described further below under "Senior Secured Credit Facility."
During the year ended March 31, 2018, holders of $10,300 of Notes elected to convert such Notes. These Notes were extinguished by issuing shares of common stock, based on the applicable conversion price of $1.364 per share, plus additional shares of common stock and cash to satisfy the early conversion payments required by the Indenture. Associated with this conversion, gross debt, net of debt discount and capitalized debt issuance costs of $2,591 and $1,019, respectively, was extinguished for a net debt extinguishment of $6,690. In total, 8,624,445 shares of common stock were issued and $247 in cash was paid to settle these positions. This resulted in an adjustment of approximately $14,238 to additional paid-in capital to reflect the shares issued upon conversion. A loss on extinguishment of debt of $1,785 was recorded as a result of the difference in carrying value of the debt, inclusive of the associated debt discount and capitalized debt issuance costs, compared to the fair market value of the consideration given comprising both common stock issued and cash paid. The proportionate amount of the underlying derivative instrument was also extinguished, as calculated on the respective conversion dates. See Note 9. "Fair Value Measurements" for more information.


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During the year ended March 31, 2019, holders of the remaining $5,700 of Notes elected to convert such Notes. These Notes were extinguished by issuing shares of common stock, based on the applicable conversion price of $1.364 per share, plus additional shares of common stock and cash to satisfy the early conversion payments required by the Indenture. Associated with this conversion, gross debt, net of debt discount and capitalized debt issuance costs of $1,360, was extinguished for a net debt extinguishment of $4,340. In total, 4,446,265 shares of common stock were issued to settle these positions. This resulted in an adjustment of approximately $10,582 to additional paid-in capital to reflect the shares issued upon conversion. A loss on extinguishment of debt of $431 was recorded as a result of the difference in carrying value of the debt, inclusive of the associated debt discount and capitalized debt issuance costs, compared to the fair market value of the consideration given comprising both common stock issued and cash paid. The proportionate amount of the underlying derivative instrument was also extinguished, as calculated on the respective conversion dates. See Note 9. "Fair Value Measurements" for more information.

As of March 31, 2019, all of the Notes have been extinguished, the underlying indenture relieved, and all derivative liabilities related to the Notes settled.

Senior Secured Credit Facility

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 revolving credit facility.

On May 22, 2019, the Company amended its existing Credit Agreement with the Bank, to extend the term of the agreement and to modify the covenants as detailed below. The Credit Agreement, as amended, provides 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, mature in two years, or May 22, 2021, and accrue interest at prime plus 0.50%, subject to a 6.00% floor, with the prime rate defined as the greater of the prime rate published in the Wall Street Journal or 5.50%. The Credit Agreement, as amended, also carries an annual facility fee of 0.20% of our available credit limit, and an unused line fee of 0.10% per annum. The obligations under the Credit Agreement are 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, are additional co-borrowers.

The Credit Agreement contains customary covenants, representations, indemnities, and events of default. In addition to customary covenants, including restrictions on payments (subject to specified exceptions), and restrictions on indebtedness (subject to specified exceptions), the Credit Agreement requires the Company to comply with the following financial covenants:

(1) Maintain a Quick Ratio, measured at the end of each month during which any advances are outstanding, of at least:

0.75:1.00        May 31, 2019 - August 31, 2019

0.80:1.00        September 1, 2019 - February 28, 2020

0.85:1.00        March 1, 2020 - August 31, 2020

0.90:1.00        September 1, 2020 and thereafter

(2) Trailing six-month earnings before depreciation, amortization, stock compensation, non-cash warrant and derivative liability expense, and any other onetime non-recurring expenses the Bank deems appropriate ("EBDAS") of not less than $1, tested as of each fiscal quarter end during which any advances are outstanding.
The Company was in compliance with all covenants of the Credit Agreement as of December 31, 2019.
At December 31, 2019, there was no outstanding principal on the Credit Agreement.

20



Interest Income / (Expense)
The Company recorded $59 and $118 of interest income, net, during the three and nine months ended December 31, 2019, respectively. This is comprised of interest earned on cash balances, partially offset by amortization of annual facility fees on the Credit Agreement.
In the prior fiscal year, inclusive of the Notes issued on September 28, 2016 and the Credit Agreement entered into on May 23, 2017, the Company recorded $131 and $397 of interest expense during the three and nine months ended December 31, 2018, respectively.
Additionally in the prior fiscal year, aggregate debt discount and debt issuance cost amortization related to the Notes, detailed in the paragraphs above, are reflected on the Consolidated Statements of Operations and Comprehensive Income / (Loss) as interest expense. Inclusive of this amortization of $63 and $251 recorded during the three and nine months ended December 31, 2018, respectively, the Company recorded $194 and $648 of total interest expense for the three and nine months ended December 31, 2018, respectively.
9.    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.
The Company’s financial liabilities as of the issuance date of the convertible notes on the initial measurement date of September 28, 2016 are presented below at fair value and were classified within the fair value hierarchy as follows:
 
 
Level 1
 
Level 2
 
Level 3
 
Balance at Inception
Financial Liabilities
 
 
 
 
 
 
 
 
Convertible note embedded derivative liability
 
$

 
$

 
$
3,693

 
$
3,693

Warrant liability
 

 

 
1,223

 
1,223

Total
 
$

 
$

 
$
4,916

 
$
4,916

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the liability. Considerable judgment is necessary to interpret market data and determine an estimated fair value. The use of different market assumptions or valuation methods may have a material effect on the estimated fair values. Fair value of the Notes was determined using the residual method of accounting whereby, first, a portion of the proceeds from the issuance of the Notes was allocated to derivatives embedded in the Notes and the warrants issued in connection with the issuance of the Notes, and the proceeds so allocated were accounted for as a convertible note embedded derivative liability and warrant liability, respectively, and second, the remainder of the proceeds from the issuance of the Notes was allocated to the convertible notes, resulting in an original debt discount amounting to $4,916. The convertible notes remained on the consolidated balance sheet at historical cost, accreted up for the amount of cumulative amortization of the debt discount over the life of the debt. The method of determining the fair value of the convertible note embedded derivative liability and warrant liability are described subsequently in this note. Market risk associated with the convertible note embedded derivative liability and warrant liability related to the potential reduction in fair value and negative impact to future earnings from an increase in price of the Company's common stock. Please refer to Note 8. "Debt" for more information.
The carrying amounts of certain financial instruments, such as cash equivalents, accounts receivable, accounts payable, and accrued liabilities, approximate fair value due to their relatively short maturities.

21



During the fiscal year ended March 31, 2019, all of the Notes were extinguished, the underlying indenture relieved, and all derivative liabilities, except warrants, related to the Notes settled. As such, as of December 31, 2019 and March 31, 2019, the Company’s financial liability presented below at fair value was classified within the fair value hierarchy as follows:
 
 
Level 1
 
Level 2
 
Level 3
 
Balance as of December 31, 2019
 
 
 
 
 
 
 
 
(Unaudited)
Financial Liabilities
 
 
 
 
 
 
 
 
Warrant liability
 
$

 
$

 
$
6,300

 
$
6,300

Total
 
$

 
$

 
$
6,300

 
$
6,300

 
 
Level 1
 
Level 2
 
Level 3
 
Balance as of March 31, 2019
Financial Liabilities
 
 
 
 
 
 
 
 
Warrant liability
 
$

 
$

 
$
8,013

 
$
8,013

Total
 
$

 
$

 
$
8,013

 
$
8,013

Convertible Note Embedded Derivative Liability
We evaluated the terms and features of our convertible notes and identified embedded derivatives (conversion options that contain “make-whole interest” provisions, fundamental change provisions, or down round conversion price adjustment provisions; collectively called the "convertible note embedded derivative liability") requiring bifurcation and accounting at fair value because the economic and contractual characteristics of the embedded derivatives met the criteria for bifurcation and separate accounting. ASC 815-10-15-83 (c) states that if terms implicitly or explicitly require or permit net settlement, then it can readily be settled net by means outside the contract, or it provides for delivery of an asset that puts the recipient in a position not substantially different from net settlement. The conversion features related to the convertible notes consist of a “make-whole interest” provision, fundamental change provision, and down round conversion price adjustment provisions, which, if the convertible notes were to be converted, would put the convertible note holder in a position not substantially different from net settlement. Given this fact pattern, the conversion features met the definition of embedded derivatives and required bifurcation and accounting at fair value.
The convertible note embedded derivative liability represented the fair value of the conversion option, fundamental change provision, and "make-whole interest" provisions, as well as the down round conversion price adjustment or conversion rate adjustment provisions of the convertible notes. There is no current observable market for these types of derivatives and, as such, the Company determined the fair value of the derivative liability using a lattice approach that incorporates a Monte Carlo simulation valuation model. A Monte Carlo valuation model considers the Company's future stock price, stock price volatility, probability of a change of control, and the trading information of the Company's common stock into which the notes are or may become convertible. The Company marked the derivative liability to market at the end of each reporting period due to the conversion price not being indexed to the Company's own stock.
Changes in the fair value of the convertible note embedded derivative liability were reflected in our Consolidated Statements of Operations and Comprehensive Income / (Loss) as “Change in fair value of convertible note embedded derivative liability.”
During the fiscal year ended March 31, 2019, all of the Notes were extinguished, the underlying indenture relieved, and all derivative liabilities related to the Notes settled.
Due to the valuation of the derivative liability being highly sensitive to the trading price of the Company's stock, the increase and decrease in the trading price of the Company's stock has the impact of increasing the loss and gain, respectively. During the three and nine months ended December 31, 2018, the Company recorded a (loss) and gain from change in fair value of convertible note embedded derivative liability of $(1,476) and $1,096, respectively, due to the increase in the Company's closing stock price during the three months ended December 31, 2018 from $1.24 to $1.83 and due to the decrease in the Company's closing stock price during the nine months ended December 31, 2018 from $2.01 to $1.83. In addition to the Company's stock price being the primary driver, valuation of the derivative liability is also impacted by the conversion of underlying notes and associated warrants. See Note 8. "Debt" for more information regarding the conversion of Convertible Notes during fiscal years 2018 and 2019.


22



Warrant Liability

The Company issued detachable warrants with the convertible notes issued on September 28, 2016. The Company accounts for its warrants issued in accordance with US GAAP accounting guidance under ASC 815 applicable to derivative instruments, which requires every derivative instrument within its scope to be recorded on the balance sheet as either an asset or liability measured at its fair value, with changes in fair value recognized in earnings. Based on this guidance, the Company determined that these warrants did not meet the criteria for classification as equity. Accordingly, the Company classified the warrants as long-term liabilities until one year from the maturity date when the liability was re-classified to current. The warrants are subject to re-measurement at each balance sheet date, with any change in fair value recognized as a component of other income (expense), net in the Consolidated Statements of Operations and Comprehensive Income / (Loss). We estimated the fair value of these warrants at the respective balance sheet dates using a Black-Scholes model that considers the Company's future stock price. Option pricing models employ subjective factors to estimate warrant liability and, therefore, the assumptions used in the model are judgmental.
Changes in the fair value of the warrant liability are primarily related to the change in price of the underlying common stock of the Company and is reflected in our Consolidated Statements of Operations and Comprehensive Income / (Loss) as “Change in fair value of warrant liability.”
The following table provides a reconciliation of the beginning and ending balances for the warrant liability measured at fair value using significant unobservable inputs (Level 3):
 
 
Level 3
Balance at March 31, 2019
 
$
8,013

Change in fair value of warrant liability
 
10,601

De-recognition on exercises
 
(12,314
)
Balance at December 31, 2019
 
$
6,300

Due to the valuation of the derivative liability being highly sensitive to the trading price of the Company's stock, the increase and decrease in the trading price of the Company's stock has the impact of increasing the loss and gain, respectively. During the three and nine months ended December 31, 2019, the Company recorded a loss from change in fair value of warrant liability of $870 and $10,601, respectively, due to the increase in the Company's closing stock price during the three months ended December 31, 2019 from $6.45 to $7.13 and during the nine months ended December 31, 2019 from $3.78 to $7.13. During the three and nine months ended December 31, 2018, the Company recorded a (loss) and gain from change in fair value of warrant liability of $(1,651) and $845, respectively, due to the increase in the Company's closing stock price during the three months ended December 31, 2018 from $1.24 to $1.83 and due to the decrease in the Company's closing stock price during the nine months ended December 31, 2018 from $2.01 to $1.83.
The market-based assumptions and estimates used in valuing the warrant liability include the following:
 
December 31, 2019
Stock price volatility
60
%
Stock price (per share)
$7.13
Expected term
0.73 years

Risk-free rate (1)
1.59
%
(1) The Black-Scholes model assumes the continuously compounded equivalent (CCE) interest rate of 1.59% based on the 1-year U.S. Treasury securities as of the valuation date. 
Changes in valuation assumptions can have a significant impact on the valuation of the warrant liability. For example, all other things being equal, a decrease/increase in our stock price, probability of change of control, or stock price volatility decreases/increases the valuation of the liability, respectively, whereas a decrease/increase in risk-free interest rates increases/decreases the valuation of the liability, respectively.

23



10.    Description of Stock Plans
Employee Stock Plan
The Company is currently issuing stock awards 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. No future grants will be made under the previous plan, the 2007 Employee, Director and Consultant Stock Plan (the “2007 Plan”). The 2011 Plan and 2007 Plan are collectively referred to as "Digital Turbine's Incentive Plans." In the year ended March 31, 2015, in connection with the acquisition of Appia (i.e., DT Media), the Company assumed the Appia, Inc. 2008 Stock Incentive Plan (the “Appia Plan”). Digital Turbine’s Incentive Plans and the Appia Plan are all collectively referred to as the “Stock Plans.”
The 2011 Plan provides 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 (“SARs”), restricted stock, and restricted stock units (sometimes referred to individually or collectively as “Awards”). 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”).
The 2011 Plan reserves 20,000,000 shares for issuance, of which 7,159,118 and 8,685,457 remained available for future grants as of December 31, 2019 and March 31, 2019, respectively. The change over the comparative period represents stock option grants, stock option forfeitures/cancellations, and restricted shares/units of common stock of 1,738,750 shares, 397,321 shares, and 184,910 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 restricted or 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 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.
With respect to RSUs, the Company expensed $68 and $152 during the three and nine months ended December 31, 2019, respectively, and $50 and $90 during the three and nine months ended December 31, 2018, respectively.
Stock Option Agreements
Stock options granted under Digital Turbine's Stock 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.

24



Stock Option Activity
The following table summarizes stock option activity for the Stock 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, 2019
 
9,128,885

 
$
1.80

 
7.31
 
$
16,347

Granted
 
1,738,750

 
4.34

 
 
 
 
Forfeited / Cancelled
 
(397,321
)
 
1.78

 
 
 
 
Exercised
 
(2,169,876
)
 
1.72

 
 
 
 
Options Outstanding, December 31, 2019
 
8,300,438

 
2.36

 
7.15
 
39,656

Vested and expected to vest (net of estimated forfeitures) at December 31, 2019 (a)
 
7,413,546

 
2.29

 
6.97
 
35,900

Exercisable, December 31, 2019
 
5,119,274

 
$
2.15

 
6.28
 
$
25,517

(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, 2019 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, 2019. The intrinsic value changes based on changes in the price of the Company's common stock.

25



Information about options outstanding and exercisable at December 31, 2019 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
$0.51 - 1.00
 
1,591,790

 
$
0.73

 
6.84
 
828,032

 
$
0.73

$1.01 - 1.50
 
1,863,050

 
$
1.29

 
6.60
 
1,718,255

 
$
1.30

$1.51 - 2.00
 
1,024,212

 
$
1.67

 
8.31
 
492,253

 
$
1.66

$2.01 - 2.50
 
560,778

 
$
2.23

 
8.30
 
250,156

 
$
2.21

$2.51 - 3.00
 
535,958

 
$
2.59

 
4.34
 
535,958

 
$
2.59

$3.51 - 4.00
 
1,812,650

 
$
3.89

 
8.15
 
680,783

 
$
3.93

$4.01 - 4.50
 
475,000

 
$
4.13

 
4.78
 
475,000

 
$
4.13

$4.51 - 5.00
 
60,000

 
$
4.65

 
3.24
 
60,000

 
$
4.65

$5.01 and over
 
377,000

 
$
6.32

 
9.03
 
78,837

 
$
5.96

 
 
8,300,438

 
2.36

 
7.15
 
5,119,274

 
2.15

Other information pertaining to stock options for the Stock Plans for the nine months ended December 31, 2019 and 2018, as stated in the table below, is as follows:
 
 
December 31,
 
 
2019
 
2018
Total fair value of options vested
 
$
2,028

 
$
1,202

Total intrinsic value of options exercised (a)
 
$
10,364

 
$
192

(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, 2019 and 2018.
During the nine months ended December 31, 2019 and 2018, the Company granted options to purchase 1,738,750 and 1,349,925 shares of its common stock, respectively, to employees with weighted-average grant-date fair values of $4.34 and $1.64, respectively.
At December 31, 2019 and 2018, there was $3,547 and $2,194 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 2.16 and 2.01 years, respectively.
Valuation of Awards
For stock options granted under Digital Turbine’s Stock Plans, the Company typically uses the Black-Scholes option pricing model to estimate the fair value 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, 2019 are presented below.

 
December 31, 2019
Risk-free interest rate
 
1.67% to 2.25%
Expected life of the options
 
5.35 to 9.83 years
Expected volatility
 
65% to 66%
Expected dividend yield
 
—%
Expected forfeitures
 
27% to 29%

26



Expected volatility is based on a blend of implied and historical volatility of the Company's common stock over the most recent period commensurate with the estimated expected term 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 the Company’s Stock Plans for the three and nine months ended December 31, 2019, which includes both stock options and restricted stock, was $917 and $2,514, respectively. Total stock compensation expense for the Company’s Stock Plans for the three and nine months ended December 31, 2018, which includes both stock options and restricted stock, was $631 and $1,781, respectively. Please refer to Note 11. "Capital Stock Transactions" regarding restricted stock.
11.    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, 2019, the Company issued 2,169,876 shares of common stock for the exercise of employee options.
The following table provides activity for warrants issued and outstanding during the nine months ended December 31, 2019:
 
 
Number of Warrants Outstanding
 
Weighted-Average Exercise Price
Outstanding as of March 31, 2019
 
3,639,100

 
$
1.37

Exercised
 
(2,524,500
)
 
1.36

Outstanding as of December 31, 2019
 
1,114,600

 
$
1.38

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 value of the Company’s common stock on the date of the grant. Compensation expense for restricted stock awards with a service and time condition is recognized on a straight-line basis over the requisite service period.

In July 2019, the Company issued 75,494 restricted shares to its Board of Directors for their next annual service period. The shares vest quarterly over one year. The fair value of the shares on the date of issuance was $421.
With respect to time condition RSAs, the Company expensed $105 and $318 during the three and nine months ended December 31, 2019, respectively, and $123 and $365 during the three and nine months ended December 31, 2018, respectively.

27



The following is a summary of restricted stock awards and activities for all vesting conditions for the nine months ended December 31, 2019:
 
 
Number of Shares
 
Weighted-Average Grant Date Fair Value
Unvested restricted stock outstanding as of March 31, 2019
 
153,328

 
$
1.39

Granted
 
75,494

 
5.58

Vested
 
(172,202
)
 
1.85

Unvested restricted stock outstanding as of December 31, 2019
 
56,620

 
$
5.58

All restricted shares, vested and unvested, cancelable and not cancelled, have been included in the outstanding shares as of December 31, 2019.
At December 31, 2019, there was $246 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.
12.    Net Income / (Loss) Per Share
Basic net income / (loss) per share is calculated by dividing net income / (loss) by the weighted-average number of shares of common stock outstanding during the period, less shares subject to repurchase, and excludes any dilutive effects of employee stock-based awards in periods where the Company had net losses. Because the Company was in a net loss position for the three months ended December 31, 2018, all potentially dilutive shares of common stock were determined to be anti-dilutive and, accordingly, were not included in the calculation of diluted net loss per share. For the nine months ended December 31, 2018, and the three and nine months ended December 31, 2019, the Company was in a net income position and has included the dilutive effect of employee stock-based awards using the treasury method and assuming an average stock price over the periods of $1.55, $7.44, and $5.90, respectively .
The following table sets forth the computation of net income / (loss) 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,
 
 
2019
 
2018
 
2019
 
2018
Income / (loss) from continuing operations, net of taxes
 
$
3,261

 
$
(1,136
)
 
$
253

 
$
2,460

Weighted-average common shares outstanding, basic
 
85,876

 
77,645

 
83,869

 
76,977

Weighted-average common shares outstanding, diluted
 
92,472

 
77,645

 
89,759

 
79,371

Basic and diluted net income / (loss) per common share
 
$
0.04

 
$
(0.01
)
 
$

 
$
0.03

Common stock equivalents included in net income per diluted share
 
6,596

 

 
5,890

 
2,394

Common stock equivalents excluded from net loss per diluted share because their effect would have been anti-dilutive
 

 
2,485

 

 


28



13.    Income Taxes
Our 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, 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 months ended December 31, 2019, a tax provision of $41 and $6, respectively, resulted in an effective tax rate of 1.2% and 2.3%, respectively. Differences in the tax provision and the statutory rate are primarily due to changes in the valuation allowance.
During the three and nine months ended December 31, 2018, a tax provision of $216 and $157, respectively, resulted in an effective tax rate of (23.5)% and 6.0%, respectively. Differences in the tax provision and statutory rate are primarily due to changes in the valuation allowance.
14.    Commitments and Contingencies

Potential Financial Exposure Related to Discontinued Operations

Please see information regarding possible exposure related to the settlement of certain assets and liabilities related to the disposition of the Pay business in Note 4. "Discontinued Operations."
15.    Geographic Information
The following table sets forth geographic information on our net revenues for the three and nine months ended December 31, 2019 and 2018. Net revenues by geography are based on the billing addresses of our customers.
 
 
Three months ended December 31,
 
 
2019
 
2018
 
 
(Unaudited)
Net revenues
 
 
 
 
     United States and Canada
 
$
22,486

 
$
20,952

     Europe, Middle East, and Africa
 
9,205

 
6,160

     Asia Pacific and China
 
3,731

 
2,312

     Mexico, Central America, and South America
 
594

 
987

Consolidated net revenues
 
$
36,016

 
$
30,411

 
 
 
 
 
 
 
Nine months ended December 31,
 
 
2019
 
2018
 
 
(Unaudited)
Net revenues
 
 
 
 
     United States and Canada
 
$
66,057

 
$
53,871

     Europe, Middle East, and Africa
 
24,129

 
13,244

     Asia Pacific and China
 
8,137

 
6,709

     Mexico, Central America, and South America
 
1,041

 
2,553

Consolidated net revenues
 
$
99,364

 
$
76,377


29



16.    Subsequent Event
On February 6, 2020, Digital Turbine Media, Inc. (“DT Media”), a wholly-owned subsidiary of the Company, entered into a Stock Purchase Agreement (the “Purchase Agreement”) with ACME Mobile, LLC (“ACME”), Mobile Posse, Inc., a wholly-owned subsidiary of ACME (“Mobile Posse”), and certain equityholders of ACME, pursuant to which DT Media would acquire (the “Acquisition”) all of the outstanding capital stock of Mobile Posse in exchange for an estimated total consideration of $66,000, payable as follows: (1) $41,500 in cash to be paid at closing, subject to purchase price adjustments, and (2) an estimated earn-out of $24,500, 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 is subject to change based on final results and calculations. Under the terms of the earn-out, over the Earn-Out Period, DT Media would 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 would be paid every three months with a true-up calculation and payment after the first nine months of the Earn-Out Period. The Purchase Agreement contains customary representations and warranties, covenants, closing conditions, and indemnification provisions. If the Acquisition does not close by March 16, 2020, under certain specified circumstances the Company would be obligated to pay ACME a $5,000 termination fee.


30



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 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 Report on Form 10-K for the fiscal year ended March 31, 2019, 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 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, innovates at the convergence of media and mobile communications, delivering an end-to-end platform solution for mobile operators, application developers, device original equipment manufacturers ("OEMs"), and other third parties to enable them to effectively monetize mobile content and generate higher-value user acquisition. Through December 31, 2019, Digital Turbine has delivered over 3 billion application pre-loads on over 369 million devices across thirty-five Operator and OEM (O&O) partnerships. The Company operates this business as one reportable segment – Advertising.
The Company's Advertising segment operates the O&O business, an advertiser solution for unique and exclusive carrier and OEM inventory, which is comprised of services including:
Ignite™ ("Ignite"), a software platform with targeted media delivery and management capabilities, and
Other recurring and life-cycle products, features, and professional services delivered on the Ignite platform.
Prior to the sale of the A&P Assets described above under Note 4. "Discontinued Operations," the Advertising reporting segment also included the A&P Assets as an operating segment within Advertising.

31



Advertising
O&O Business
The Company's O&O business is an advertiser solution for unique and exclusive carrier and OEM inventory, which is comprised of Ignite and other recurring and life-cycle products, features, and professional services delivered on the Ignite platform.
Ignite is a software platform that enables mobile operators and OEMs to control, manage, and monetize devices through application installation at the time of activation and over the life of a mobile device. Ignite allows mobile operators and OEMs 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 Ignite platform, products, and features for a structured fee. Setup Wizard, Dynamic Installs, and Software Development Kit ("SDK") are the three 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 advertising revenue streams. The Company has launched Ignite with mobile operators and OEMs in North America, Latin America, Europe, Asia Pacific, India, and Israel.
Disposition of the Content Reporting Segment and A&P Business
On April 29, 2018, the Company entered into two distinct disposition agreements with respect to selected 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 disclosed in the Company’s Form 8-K filed May 1, 2018 with the SEC. The transaction was completed on July 1, 2018. With the sale of these assets, the Company has 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 a period of three years as disclosed 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 continuing reporting segment.
Discontinued Operations
As a result of the dispositions, the results of operations from our Content reporting segment and A&P business within the Advertising reporting segment are reported as “Net loss from discontinued operations, net of taxes” and the related assets and liabilities are classified as “held for disposal" in the consolidated financial statements in Item 1 of this Report. The Company has recast prior period amounts presented within this Report to provide visibility and comparability.
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 described above.

32



RESULTS OF OPERATIONS
(Unaudited)
 
 
Three months ended December 31,
 
 
 
Nine months ended December 31,
 
 
 
 
2019
 
2018
 
% of Change
 
2019
 
2018
 
% of Change
 
 
(in thousands, except per share amounts)
 
 
 
(in thousands, except per share amounts)
 
 
Net revenues
 
$
36,016

 
$
30,411

 
18.4
 %
 
$
99,364

 
$
76,377

 
30.1
 %
License fees and revenue share
 
21,576

 
19,195

 
12.4
 %
 
59,997

 
50,213

 
19.5
 %
Other direct costs of revenues
 
400

 
538

 
(25.7
)%
 
1,022

 
1,553

 
(34.2
)%
Gross profit
 
14,040

 
10,678

 
31.5
 %
 
38,345

 
24,611

 
55.8
 %
Total operating expenses
 
9,908

 
8,222

 
20.5
 %
 
28,058

 
23,100

 
21.5
 %
Income from operations
 
4,132

 
2,456

 
68.2
 %
 
10,287

 
1,511

 
580.8
 %
Interest income / (expense), net
 
59

 
(194
)
 
(130.4
)%
 
118

 
(648
)
 
(118.2
)%
Foreign exchange transaction gain / (loss)
 

 
(2
)
 
(100.0
)%
 

 
7

 
(100.0
)%
Change in fair value of convertible note embedded derivative liability
 

 
(1,476
)
 
(100.0
)%
 

 
1,096

 
(100.0
)%
Change in fair value of warrant liability
 
(870
)
 
(1,651
)
 
(47.3
)%
 
(10,601
)
 
845

 
(1,354.6
)%
Loss on extinguishment of debt
 

 
(10
)
 
(100.0
)%
 

 
(25
)
 
(100.0
)%
Other income / (expense)
 
(19
)
 
(43
)
 
(55.8
)%
 
455

 
(169
)
 
(369.2
)%
Income / (loss) from continuing operations before income taxes
 
3,302

 
(920
)
 
(458.9
)%
 
259

 
2,617

 
(90.1
)%
Income tax provision
 
41

 
216

 
(81.0
)%
 
6

 
157

 
(96.2
)%
Income / (loss) from continuing operations, net of taxes
 
3,261

 
(1,136
)
 
(387.1
)%
 
253

 
2,460

 
(89.7
)%
Net income / (loss)
 
$
3,326

 
$
(1,348
)
 
(346.7
)%
 
$
82

 
$
848

 
(90.3
)%
Basic and diluted net income / (loss) per common share
 
$
0.04

 
$
(0.01
)
 
(500.0
)%
 
$

 
$
0.01

 
(100.0
)%
Weighted-average common shares outstanding, basic
 
85,876

 
77,645

 
10.6
 %
 
83,869

 
76,977

 
9.0
 %
Weighted-average common shares outstanding, diluted
 
92,472

 
77,645

 
19.1
 %
 
89,759

 
79,371

 
13.1
 %
Comparison of the three and nine months ended December 31, 2019 and 2018
Net Revenues
During the three and nine months ended December 31, 2019, there was an approximately $5,605 or 18.4% and $22,987 or 30.1% increase in overall revenue, respectively, as compared to the three and nine months ended December 31, 2018.
The Company's O&O business is an advertiser solution for unique and exclusive carrier and OEM inventory. During the three and nine months ended December 31, 2019, the main revenue driver for the O&O business was the Ignite platform. Ignite is a mobile application management software that enables mobile operators and OEMs to control, manage, and monetize applications installed at the time of activation and over the life of a mobile device. This increase in Ignite net revenue was attributable to increased demand for the Ignite service, driven primarily by increased revenue from advertising partners across existing commercial deployments of Ignite with carrier partners as well as expanded distribution with new carrier partners and the deployment of new Ignite services and products.
With respect to customer revenue concentration, 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% of net revenues, respectively. During the three and nine months ended December 31, 2018, Oath Inc. represented 28.8% and 31.1% of net revenues, respectively.

33



With respect to partner revenue concentration, the Company partners with mobile carriers and OEMs to deliver applications on our Ignite platform through the carrier network. During the three and nine months ended December 31, 2019, Verizon Wireless, a carrier partner, generated 37.5% and 40.3%, respectively; AT&T Inc., a carrier partner, including its Cricket subsidiary, generated 29.8% and 30.9%, respectively; and America Movil Inc., a carrier partner, primarily through its subsidiary TracFone Wireless Inc., generated 12.4% and 10%, respectively, of our net revenues. During the three and nine months ended December 31, 2018, Verizon Wireless, a carrier partner, generated 43.7% and 47.6%, respectively; and AT&T Inc., a carrier partner, including its Cricket subsidiary, generated 38.5% and 38.4%, 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,
 
 
 
 
2019
 
2018
 
% of Change
 
2019
 
2018
 
% of Change
 
 
(in thousands)
 
 
 
(in thousands)
 
 
Gross margin $
 
$
14,040

 
$
10,678

 
31.5
%
 
$
38,345

 
$
24,611

 
55.8
%
Gross margin %
 
39.0
%
 
35.1
%
 
11.1
%
 
38.6
%
 
32.2
%
 
19.9
%
Total gross margin, inclusive of the impact of other direct costs of revenues (including amortization of intangibles), was approximately $14,040 or 39.0% of net revenues and $38,345 or 38.6% of net revenues for the three and nine months ended December 31, 2019, respectively, versus approximately $10,678 or 35.1% of net revenues and $24,611 or 32.2% of net revenues for the three and nine months ended December 31, 2018, respectively. The increase in gross margin over the comparative periods of $3,362 or 31.5% and $13,734 or 55.8%, respectively, is primarily attributable to an increased yield from an improved mix of partner diversification and non-dynamic install revenue on our O&O platform.
Operating Expenses
 
 
Three months ended December 31,
 
 
 
Nine months ended December 31,
 
 
 
 
2019
 
2018
 
% of Change
 
2019
 
2018
 
% of Change
 
 
(in thousands)
 
 
 
(in thousands)
 
 
Product development
 
$
2,783

 
$
2,428

 
14.6
%
 
$
8,312

 
$
8,174

 
1.7
%
Sales and marketing
 
2,815

 
1,962

 
43.5
%
 
7,534

 
5,711

 
31.9
%
General and administrative
 
4,310

 
3,832

 
12.5
%
 
12,212

 
9,215

 
32.5
%
Total operating expenses
 
$
9,908

 
$
8,222


20.5
%

$
28,058


$
23,100

 
21.5
%
Total operating expenses for the three and nine months ended December 31, 2019 were approximately $9,908 and $28,058, respectively, and for the three and nine months ended December 31, 2018 were approximately $8,222 and $23,100, respectively, an increase of approximately $1,686 or 20.5% and $4,958 or 21.5% over the comparative periods, respectively.
Product development expenses include the development and maintenance of the Company's product suite. Expenses in this area are primarily a function of personnel. Product development expenses for the three and nine months ended December 31, 2019 were approximately $2,783 and $8,312, respectively, and for the three and nine months ended December 31, 2018 were approximately $2,428 and $8,174, respectively, an increase of approximately $355 or 14.6% and $138 or 1.7%, respectively, over the comparative periods. The increase in product development expenses over the comparative three-month periods was primarily attributable to increased product development headcount and other employee-related and third-party development-related costs as the Company continues to scale its product development organization to support the Company's growth. Product development expenses remained flat over the comparative nine-month periods.

34



Sales and marketing expenses represent the costs of sales and marketing personnel, advertising and marketing campaigns, and campaign management. Sales and marketing expenses for the three and nine months ended December 31, 2019 were approximately $2,815 and $7,534, respectively, and for the three and nine months ended December 31, 2018 were approximately $1,962 and $5,711, respectively, an increase of approximately $853 or 43.5% and $1,823 or 31.9%, respectively, over the comparative period. The increase in sales and marketing expenses over the comparative periods was primarily attributable to increased travel expenses related to the Company's continued expansion of its global footprint and increased commissions associated with the sales team generating more revenue through new and existing advertising relationships.
General and administrative expenses represent management, finance, and support personnel costs in both the parent and subsidiary companies, which include professional and consulting costs, in addition to other costs such as rent, stock-based compensation, and depreciation expense. General and administrative expenses for the three and nine months ended December 31, 2019 were approximately $4,310 and $12,212, respectively, and for the three and nine months ended December 31, 2018 were $3,832 and $9,215, respectively, an increase of approximately $478 or 12.5% and $2,997 or 32.5%, respectively, over the comparative periods. The increase over the comparative periods is primarily attributable to higher employee-related expenses related to the overall growth of the Company.
Interest and Other Income / (Expense)
 
 
Three months ended December 31,
 
 
 
Nine months ended December 31,
 
 
 
 
2019
 
2018
 
% of Change
 
2019
 
2018
 
% of Change
 
 
(in thousands)
 
 
 
(in thousands)
 
 
Interest income / (expense), net
 
$
59

 
$
(194
)
 
(130.4
)%
 
$
118

 
$
(648
)
 
(118.2
)%
Foreign exchange transaction gain / (loss)
 

 
(2
)
 
(100.0
)%
 

 
7

 
(100.0
)%
Change in fair value of convertible note embedded derivative liability
 

 
(1,476
)
 
(100.0
)%
 

 
1,096

 
(100.0
)%
Change in fair value of warrant liability
 
(870
)
 
(1,651
)
 
(47.3
)%
 
(10,601
)
 
845

 
(1,354.6
)%
Loss on extinguishment of debt
 

 
(10
)
 
(100.0
)%
 

 
(25
)
 
(100.0
)%
Other income / (expense)
 
(19
)
 
(43
)
 
(55.8
)%
 
455

 
(169
)
 
(369.2
)%
Total interest and other income / (expense), net
 
$
(830
)
 
$
(3,376
)
 
(75.4
)%
 
$
(10,028
)
 
$
1,106

 
(1,006.7
)%
Total interest and other income / (expense), net, for the three and nine months ended December 31, 2019 was approximately $(830) and $(10,028), respectively, and for the three and nine months ended December 31, 2018 was $(3,376) and $1,106, respectively, a decrease in interest and other income / (expense) of approximately $2,546 or 75.4% and an increase of approximately $11,134 or 1,006.7%, respectively, over the comparative periods. The decrease and increase, respectively, in other income / (expense) over the comparative periods are primarily attributable to the change in fair value of convertible note embedded derivative liability and the change in fair value of warrant liability, primarily as a result of increases in the trading price of the Company's common stock. Interest and other income / (expense), net, includes net interest income / (expense), foreign exchange transaction gain / (loss), change in fair value of convertible note embedded derivative liability, change in fair value of warrant liability, loss on extinguishment of debt, and other ancillary income / (expense) earned or incurred by the Company.
Interest Expense, Net
Interest expense is primarily attributable to 1) fees related to the obtainment of debt, which were recorded as debt issuance costs and expensed as a component of interest expense over the life of the debt in the prior comparative periods; 2) interest expense incurred on the Notes at a stated interest rate of 8.75% in the prior comparative periods and interest expense incurred on the Credit Agreement at approximately 6.75% (Wall Street Journal Prime Rate + 0.50%) in the prior comparative periods; and 3) amortization of debt discount related to the Notes, which were expensed as a component of interest expense over the life of the debt in the prior comparative periods.
Interest income consists of interest income earned on our cash.

35



During the three and nine months ended December 31, 2019, the Company had no outstanding debt and incurred no interest expense. Interest expense during the three and nine months ended December 31, 2018 was incurred from the $16,000 aggregate principal amount of 8.75% Convertible Notes due 2020 (the “Notes”), issued on September 28, 2016, and from amounts drawn on our business finance agreement (the “Credit Agreement”) with Western Alliance Bank (the “Bank”).
The Company recorded $59 and $118 of interest income during the three and nine months ended December 31, 2019, respectively, and $194 and $648 of interest expense during the three and nine months ended December 31, 2018, respectively. The increase in interest income is a function of earning interest on our cash balances during the three and nine months ended December 31, 2019. The decrease in interest expense is a function of no principal debt outstanding during the three and nine months ended December 31, 2019.
Change in Fair Value of Convertible Note Embedded Derivative Liability
The Company accounts for the convertible note embedded derivative liability in accordance with US GAAP accounting guidance under ASC 815 applicable to derivative instruments, which requires every derivative instrument within its scope to be recorded on the balance sheet as either an asset or liability measured at its fair value, with changes in fair value recognized in earnings. All of the underlying debt related to the derivative liability was converted to equity during the prior fiscal year, and the derivative position settled. As such, no change in fair value was recorded during the three and nine months ended December 31, 2019.
Due to the valuation of the derivative liability being highly sensitive to the trading price of the Company's stock, the increase and decrease in the trading price of the Company's stock has the impact of increasing the loss and gain, respectively. During the three and nine months ended December 31, 2018, the Company recorded a (loss) and gain from change in fair value of convertible note embedded derivative liability of $(1,476) and $1,096, respectively, due to the increase in the Company's closing stock price during the three months ended December 31, 2018 from $1.24 to $1.83 and due to the decrease in the Company's closing stock price during the nine months ended December 31, 2018 from $2.01 to $1.83. In addition to the Company's stock price being the primary driver, valuation of the derivative liability is also impacted by the conversion of underlying notes and associated warrants. See Note 8. "Debt" for more information regarding the conversion of Convertible Notes during fiscal years 2018 and 2019.
Change in Fair Value of Warrant Liability
The Company accounts for the warrants issued in connection with the above-noted sale of Notes in accordance with US GAAP accounting guidance under ASC 815 applicable to derivative instruments, which requires every derivative instrument within its scope to be recorded on the balance sheet as either an asset or liability measured at its fair value, with changes in fair value recognized in earnings. Based on this guidance, the Company determined that these warrants did not meet the criteria for classification as equity. Accordingly, the Company classified the warrants as long-term liabilities. The warrants are subject to re-measurement at each balance sheet date, with any change in fair value recognized as a component of other income / (expense), net, in the Consolidated Statements of Operations and Comprehensive Income / (Loss).
Due to the valuation of the derivative liability being highly sensitive to the trading price of the Company's stock, the increase and decrease in the trading price of the Company's stock has the impact of increasing the loss and gain, respectively. During the three and nine months ended December 31, 2019, the Company recorded a loss from change in fair value of warrant liability of $870 and $10,601, respectively, due to the increase in the Company's closing stock price during the three months ended December 31, 2019 from $6.45 to $7.13 and during the nine months ended December 31, 2019 from $3.78 to $7.13. During the three and nine months ended December 31, 2018, the Company recorded a (loss) and gain from change in fair value of warrant liability of $(1,651) and $845, respectively, due to the increase in the Company's closing stock price during the three months ended December 31, 2018 from $1.24 to $1.83 and due to the decrease in the Company's closing stock price during the nine months ended December 31, 2018 from $2.01 to $1.83.
Liquidity and Capital Resources
Our primary sources of liquidity are cash from operations and debt. As of December 31, 2019, we had cash and restricted cash totaling approximately $33,879 and no debt.


36



Cash Flow Summary
 
 
Nine months ended December 31,
 
 
 
 
2019
 
2018
 
% of Change
 
 
(in thousands)
 
 
Consolidated statements of cash flows data:
 
 
 
 
 
 
Net cash provided by operating activities - continuing operations
 
$
20,155

 
$
2,529

 
697.0
 %
Capital expenditures
 
(3,179
)
 
(1,781
)
 
(78.5
)%
Options and warrants exercised
 
6,353

 
223

 
2,748.9
 %
Repayment of debt obligations
 

 
(50
)
 
100.0
 %
Effect of exchange rate changes on cash
 
(364
)
 
(5
)
 
(7,180.0
)%
Operating Activities
During the nine months ended December 31, 2019 and 2018, the Company's net cash provided by operating activities from continuing operations was $20,155 and $2,529, respectively, a positive change of $17,626 or 697.0%. The increase in net cash provided by operating activities was primarily attributable to the change in working capital accounts, excluding current assets and current liabilities held for disposal, over the comparative periods.
During the nine months ended December 31, 2019, net cash provided by operating activities from continuing operations was $20,155, resulting from a net income of $253 offset by net non-cash expenses of $14,809, which included depreciation and amortization, loss on disposal of fixed assets, change in allowance for doubtful accounts, stock-based compensation, stock-based compensation related to the vesting of restricted stock for services, and the change in fair value of warrant liability of approximately $1,484, $4, $206, $2,044, $470, and $10,601, respectively. Net cash provided by operating activities during the nine months ended December 31, 2019 was also impacted by the change in net working capital accounts as of December 31, 2019 as compared to March 31, 2019, with a net increase in current liabilities of approximately $10,281 (inclusive of accounts payable, accrued license fees and revenue share, accrued compensation, accrued interest, and other current liabilities) offset by a net increase in current assets of approximately $5,022 (inclusive of accounts receivable and prepaid expenses and other current assets but excluding cash and current portion of deferred tax assets) over the comparative periods. Lastly, net cash provided by operating activities during the nine months ended December 31, 2019 was also impacted by the increase in right-of-use assets of $2,029, offset by the increase in other non-current liabilities, mainly due to the long-term components of our lease liabilities of $1,823, due to our implementation of ASC 842.
Investing Activities
For the nine months ended December 31, 2019 and 2018, net cash used in investing activities from continuing operations was approximately $3,179 and $1,781, respectively, which is comprised of capital expenditures related mostly to internally-developed software.
Financing Activities
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. For the nine months ended December 31, 2018, net cash provided by financing activities was approximately $173, comprised of proceeds from the exercise of stock options of $223 offset by repayment of debt obligations of $50.

37



As of December 31, 2019, our total contractual cash obligations were as follows:
 
 
Payments Due by Period
 
 
Total
 
Within the Next 12 Months
 
2 to 3 Years
 
4 to 5 Years
 
More Than 5 Years
Contractual cash obligations
 
(in thousands)
Operating leases (a)
 
$
4,011

 
$
948

 
$
1,816

 
$
1,247

 
$

Interest and bank fees
 
41

 
41

 

 

 

Uncertain tax positions (b)
 

 

 

 

 

Total contractual cash obligations
 
$
4,052

 
$
989

 
$
1,816

 
$
1,247

 
$

(a) Consists of operating leases for our office facilities.
(b) We have approximately $1,003 in additional liabilities associated with uncertain tax positions that are not expected to be liquidated within the next twelve months. We are unable to reliably estimate the expected payment dates for these additional non-current liabilities.
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 Report.

Senior Secured Credit Facility

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 Agreement with the Bank to extend the term of the agreement and to modify the covenants as detailed below. The Credit Agreement, as amended, provides 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, mature in two years, or May 22, 2021, and accrue interest at prime plus 0.50%, subject to a 6.00% floor, with the prime rate defined as the greater of the prime rate published in the Wall Street Journal or 5.50%. The Credit Agreement, as amended, also carries an annual facility fee of 0.20% of our available credit limit, and an unused line fee of 0.10% per annum. The obligations under the Credit Agreement are 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, are additional co-borrowers.

The Credit Agreement contains customary covenants, representations, indemnities, and events of default. In addition to customary covenants, including restrictions on payments (subject to specified exceptions) and restrictions on indebtedness (subject to specified exceptions), the Credit Agreement requires the Company to comply with the following financial covenants:

(1) Maintain a Quick Ratio, measured at the end of each month during which any advances are outstanding, of at least:

0.75:1.00        May 31, 2019 - August 31, 2019

0.80:1.00        September 1, 2019 - February 28, 2020

0.85:1.00        March 1, 2020 - August 31, 2020

0.90:1.00        September 1, 2020 and thereafter

(2) Trailing six-month earnings before depreciation, amortization, stock compensation, non-cash warrant and derivative liability expense, and any other onetime non-recurring expenses the Bank deems appropriate ("EBDAS") of not less than $1, tested as of each fiscal quarter end during which any advances are outstanding.
The Company was in compliance with all covenants of the Credit Agreement as of December 31, 2019.
At December 31, 2019, there was no outstanding principal on the Credit Agreement.

38



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
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 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 estimates and policies, 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, 2019.
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 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 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 balances that are denominated in these currencies impact our net income / (loss). 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.

39



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, who is our principal executive officer, and our 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. 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 and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
There were no 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 quarter covered by this Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

40



PART II - OTHER INFORMATION
Item 1.    Legal Proceedings

Potential Financial Exposure Related to Discontinued Operations

Please see information regarding possible exposure related to the settlement of certain assets and liabilities related to the disposition of the Pay business in Note 4. "Discontinued Operations."
Item 1A. Risk Factors
The Company is not aware of any material changes from the risk factors set forth under “Risk Factors” in its Annual Report on Form 10-K for the year ended March 31, 2019, except as follows:
Risks Related to Our Business
General Risks

There are risks and uncertainties associated with our proposed acquisition of Mobile Posse
On February 6, 2019, Digital Turbine Media, Inc. (“DT Media”), a wholly-owned subsidiary of ours, entered into a Stock Purchase Agreement (the “Purchase Agreement”) with ACME Mobile, LLC (“ACME”), Mobile Posse, Inc., a wholly-owned subsidiary of ACME (“Mobile Posse”), and certain equityholders of ACME, pursuant to which DT Media would acquire (the “Acquisition”) all of the outstanding capital stock of Mobile Posse. There are risks and uncertainties related to the closing of the Acquisition, including the satisfaction of conditions to the closing of the Acquisition. In addition, we have incurred, and will continue to incur, significant costs, expenses and fees for professional services and other transaction costs in connection with the Acquisition, and these fees and costs are payable by us regardless of whether the Acquisition is consummated.


Failure to complete the proposed Acquisition could adversely affect our business and the market price of our common stock.
There is no assurance that the closing of the Acquisition will occur, and we cannot predict with certainty whether and when the conditions to closing will be satisfied. In addition, the Purchase Agreement may be terminated under certain specified circumstances. Also, if the Acquisition is not consummated by March 16, 2020, under certain circumstances we may be required to pay ACME a termination fee of $5,000. If the Acquisition is not consummated, our stock price may decline. We will have incurred significant costs, including, among other things, the diversion of management resources, for which we will have received little or no benefit if the closing of the Acquisition does not occur. A failed transaction may result in negative publicity and a negative impression of us in the investment community. The occurrence of any of these events individually or in combination could have a material adverse effect on our results of operations and the market price of our common stock.


41



The failure to successfully integrate Mobile Posse’s business and operations in the expected time frame may adversely affect our future results. 
We believe that the acquisition of Mobile Posse will result in certain benefits, including providing complementary platform offerings and creating growth opportunities. To realize these anticipated benefits, however, the business of Mobile Posse must be successfully integrated. The success of the Acquisition will depend on our ability to realize these anticipated benefits from integrating the business of Mobile Posse. The Acquisition may fail to realize the anticipated benefits for a variety of reasons, including the following:
failure to successfully expand relationships with carriers, OEMs, and other partners and customers;
failure to successfully take advantage of revenue growth opportunities;
failure to effectively coordinate sales and marketing efforts to communicate the capabilities of the complementary offerings;
potential difficulties integrating and harmonizing operations and other key functions;
the loss of key employees; and
failure to combine product offerings quickly and effectively.    
The integration may result in additional and unforeseen expenses or delays. If we are unable to successfully integrate Mobile Posse’s business and operations, or if there are delays in integrating the business, the anticipated benefits of the Acquisition may not be realized or may take longer to realize than expected.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3.    Defaults Upon Senior Securities
Not applicable.
Item 4.    Mine Safety Disclosures
Not applicable.
Item 5.    Other Information
None.

42



ITEM 6.    EXHIBITS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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 Report on Form 10-Q or as a separate disclosure document, and are not being incorporated by reference into any Securities Act registration statement.

43



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 10, 2020
 
 
 
 
By:
 
/s/ William Stone
 
 
 
 
William Stone
 
 
 
 
Chief Executive Officer
 
 
 
 
(Principal Executive Officer)
 
 
Digital Turbine, Inc.
Dated: February 10, 2020
 
 
 
 
By:
 
/s/ Barrett Garrison
 
 
 
 
Barrett Garrison
 
 
 
 
Chief Financial Officer
 
 
 
 
(Principal Financial Officer)

44
Exhibit
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, William Stone, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Digital Turbine, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: February 10, 2020
 
 
 
 
 
 
By:
/s/ William Stone
 
 
William Stone
 
 
Chief Executive Officer
(Principal Executive Officer)
 

Exhibit
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Barrett Garrison, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Digital Turbine, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: February 10, 2020
 
 
 
 
 
 
By:
/s/ Barrett Garrison
 
 
Barrett Garrison
 
 
Chief Financial Officer
(Principal Financial Officer)
 

Exhibit
Exhibit 32.1
Certification of Principal Executive Officer
Pursuant to U.S.C. Section 1350
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Digital Turbine, Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:
The Quarterly Report on Form 10-Q for the period ending December 31, 2019 of the Company (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: February 10, 2020
 
 
 
 
 
 
By:
/s/ William Stone
 
 
William Stone
 
 
Chief Executive Officer
(Principal Executive Officer)
 

Exhibit
Exhibit 32.2
Certification of Principal Financial Officer
Pursuant to U.S.C. Section 1350
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Digital Turbine, Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:
The Quarterly Report on Form 10-Q for the period ending December 31, 2019 of the Company (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: February 10, 2020
 
 
 
 
 
 
By:
/s/ Barrett Garrison
 
 
Barrett Garrison
 
 
Chief Financial Officer
(Principal Financial Officer)
 

v3.19.3.a.u2
Income Taxes (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Income Tax Disclosure [Abstract]        
Income tax provision $ 41 $ 216 $ 6 $ 157
Effective tax rate 1.20% (23.50%) 2.30% 6.00%
v3.19.3.a.u2
Property and Equipment - Additional Information (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Property Plant And Equipment [Line Items]        
Depreciation expense $ 540 $ 374 $ 1,484 $ 1,139
Internal use assets | General and administrative        
Property Plant And Equipment [Line Items]        
Depreciation expense 140 170 462 591
Internally developed software to be sold | Other direct costs of revenue        
Property Plant And Equipment [Line Items]        
Depreciation expense $ 400 $ 204 $ 1,022 $ 548
v3.19.3.a.u2
Debt - Senior Secured Credit Facility (Details) - Credit Agreement - Western Alliance Bank - USD ($)
9 Months Ended
May 22, 2019
Dec. 31, 2019
May 23, 2017
Debt Instrument [Line Items]      
Credit agreement, total facility amount $ 20,000,000   $ 5,000,000
Credit agreement, term   2 years  
Credit agreement, basis spread on variable rate 0.50%    
Credit agreement, interest rate floor 6.00%    
Credit agreement, current interest rate 5.50%    
Credit agreement, annual facility fee 0.20%    
Credit agreement, unused line fee 0.10%    
Trailing six-month EBDAS   $ 1.00  
Credit agreement, outstanding principal   $ 0  
May 31, 2019 - August 31, 2019      
Debt Instrument [Line Items]      
Quick ratio   75.00%  
September 1, 2019 - February 28, 2020      
Debt Instrument [Line Items]      
Quick ratio   80.00%  
March 1, 2020 - August 31, 2020      
Debt Instrument [Line Items]      
Quick ratio   85.00%  
September 1, 2020 and thereafter      
Debt Instrument [Line Items]      
Quick ratio   90.00%  
v3.19.3.a.u2
Leases (Tables)
9 Months Ended
Dec. 31, 2019
Leases [Abstract]  
Schedule, by fiscal year, of maturities of lease liabilities
Schedule, by fiscal year, of maturities of lease liabilities as of:
 
 
December 31, 2019
 
 
(Unaudited)
Remainder of fiscal year 2020
 
$
169

Fiscal year 2021
 
688

Fiscal year 2022
 
705

Fiscal year 2023
 
723

Fiscal year 2024
 
520

Thereafter
 
203

Total undiscounted cash flows
 
3,008

(Less imputed interest)
 
(368
)
Present value of lease liabilities
 
$
2,640

v3.19.3.a.u2
Summary of Significant Accounting Policies (Policies)
9 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Interim Consolidated Financial Information
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 U.S. Securities and Exchange Commission ("SEC") in Digital Turbine, Inc.'s Annual Report on Form 10-K for the fiscal year ended March 31, 2019. 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. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments of a normal recurring nature considered necessary to fairly state the financial position of Digital Turbine, Inc. and its consolidated subsidiaries at December 31, 2019, the results of their operations and corresponding comprehensive income / (loss) for the three and nine months ended December 31, 2019 and 2018, and their cash flows for the nine months ended December 31, 2019 and 2018. 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. The results of operations for the interim period are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2020.
Recently Issued Accounting Pronouncements and Accounting Pronouncements Adopted During the Period
Recently Issued Accounting Pronouncements
The significant accounting policies and recent accounting pronouncements were described in Note 4 of the consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended March 31, 2019. There have been no significant changes in or updates to the accounting policies since March 31, 2019. 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 February 2016, the FASB issued Account Standards Update ("ASU") 2016-02: Leases (Topic 842). This update changes lessee accounting to reflect the financial liability and right-of-use assets that are inherent to leasing an asset on the balance sheet. This guidance is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. As such, the Company adopted this standard during our quarter ended June 30, 2019 using the modified retrospective method, such that we will account for leases that commenced before the effective date of ASU No. 2016-02 in accordance with previous GAAP unless the lease is modified, except we will recognize right-of-use assets and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. The impact of adoption resulted in a gross-up of the Consolidated Balance Sheet with the creation of a right-of-use asset and a corresponding financial liability partially offset by the relief of other liability accounts related to the change in accounting standard. The impact on the Consolidated Statements of Operations and Comprehensive Income / (Loss) was negligible. The adoption of this standard did not have a material net impact on the Company's consolidated results of operations, financial condition, or cash flows.
Revenue from Contract with Customer
Revenue from Contracts with Customers
The Company adopted Accounting Standards Codification ("ASC") 606 on April 1, 2018, and ASC 606 is effective from the period beginning April 1, 2016 using the modified retrospective method for all contracts not completed as of the effective date. For contracts that were modified before the effective date, the Company reflected the aggregate effect of all modifications when identifying performance obligations and allocating transaction price in accordance with practical expedient ASC 606-10-65-1-(f)-4, which did not have a material effect on the adjustment to accumulated deficit. The adoption of ASC 606 represents a change in accounting principle that will more closely align revenue recognition with the delivery of the Company's services and will provide financial statement readers with enhanced disclosures. In accordance with ASC 606, revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services.
To achieve this core principle, the Company applied the following five steps:
1) Identify the contract with a customer
A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.
2) Identify the performance obligations in the contract
Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company must apply judgment to determine whether promised services are capable of being distinct and distinct in the context of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation.
3) Determine the transaction price
The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the customer. None of the Company's contracts contain financing or variable consideration components.
4) Allocate the transaction price to performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis. The Company determines standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.
5) Recognize revenue when or as the Company satisfies a performance obligation
The Company satisfies performance obligations at a point in time as discussed in further detail under "Disaggregation of Revenue" below. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer.

Disaggregation of Revenue
All of the Company's performance obligations, and associated revenue, are generally transferred to customers at a point in time.
O&O Services
The Company’s Advertising business consists of one operating segment (O&O), an advertiser solution for unique and exclusive carrier and OEM inventory, which is comprised of services including:
Ignite, a mobile application management software that enables mobile operators and OEMs to control, manage, and monetize applications installed at the time of activation and over the life of a mobile device. Ignite allows mobile operators and OEMs to personalize the application activation experience for customers and monetize their home screens via Cost-Per-Install or CPI arrangements, Cost-Per-Placement or CPP arrangements, and/or Cost-Per-Action or CPA arrangements with third party advertisers. There are several different delivery methods available to operators and OEMs on first boot of the device: Wizard, Dynamic Installs, or Software Development Kit ("SDK"). Optional notification features are available throughout the life-cycle of the device, providing operators and OEMs additional opportunity for advertising revenue streams.

Other products and professional services directly related to the Ignite platform.
Carriers and OEMs
The Company generally offers these services under a vendor contract revenue share model or under a customer contract per device license fee model with carriers and OEMs for a two to four year software as a service ("SaaS") license agreement. These agreements typically include the following services: the access to the SaaS platform, hosting fees, solution features, and general support and maintenance. The Company has concluded that each promised service is delivered concurrently with all other promised service over the contract term and, as such, has concluded these promises are a single performance obligation that includes a series of distinct services that have the same pattern of transfer to the customer. Consideration for the Company’s license arrangements consist of fixed and usage based fees, invoiced monthly or quarterly. The Company's contracts do not include advance non-refundable fees. Monthly license fees are based on the number of devices on a per device license fee basis. Monthly hosting and maintenance fees are generally fixed. These monthly fees are subject to a service level agreement ("SLA"), which requires that the services are available to the customer based on a predefined performance criteria. If the services do not meet these criteria, monthly fees are subject to adjustment or refund. The Company satisfies its performance obligation by providing access to its SaaS platform over time and processing transactions. For non-usage based fees, the period of time over which the Company performs its obligations is inherently commensurate with the contract term. The performance obligation is recognized on time elapsed basis, by month for which the services are provided. For usage-based fees, revenue is recognized in the month in which the Company provides the usage to the customer.
Third-Party Advertisers
The Company generally offers these services under a customer contract Cost-Per-Install or CPI arrangements, Cost-Per-Placement or CPP arrangements, and/or Cost-Per-Action or CPA arrangements with third-party advertisers and developers, as well as advertising aggregators, generally in the form of insertion orders that specify the type of arrangement (as detailed above) at particular set budget amounts/restraints. These advertiser customer contracts are generally short term in nature at less than one year as the budget amounts are typically spent in full within this time period. These agreements typically include the delivery of applications through partner networks, defined as carriers or OEMs, to home screens of devices. The Company has concluded that the delivery of the advertisers application is delivered at a point in time and, as such, has concluded these deliveries are a single performance obligation. The Company invoices fees which are generally variable based on the arrangement, which would typically include the number of applications delivered at a specified price per application. For applications delivered, revenue is recognized in the month in which the Company delivers the application to the end consumer.
Professional Services
The Company offers professional services that support the implementation of its Ignite platform for carriers and OEMs, including technology development and integration services. These contracts generally include delivery and integration of the technology development product and revenue is recognized when formal acceptance is confirmed by the customer. Services are billed in one lump sum. For the majority of these contracts, for which the Company has the right to invoice the customer in an amount that directly corresponds with the value to the customer of the Company's performance to date, the Company recognizes revenue based on the amount billable to the customer in accordance with practical expedient ASC 606-10-55-18.
Costs to Obtain and Fulfill a Contract
The Company capitalizes commission expenses paid to internal sales personnel that are incremental to obtaining customer contracts. These costs are deferred in “prepaid expenses and other current assets,” net of any long-term portion included in “other non-current assets." The judgments made in determining the amount of costs incurred include whether the commissions are in fact incremental and would not have occurred absent the customer contract. Costs to obtain a contract are amortized as sales and marketing expense on a straight line basis over the expected period of benefit. These costs are periodically reviewed for impairment. The Company has evaluated related activity and have determined the costs to obtain a contract to be immaterial and do not require disclosure.
The Company capitalizes costs incurred to fulfill its contracts that i) relate directly to the contract, ii) are expected to generate resources that will be used to satisfy the Company’s performance obligation under the contract and iii) are expected to be recovered through revenue generated under the contract. Contract fulfillment costs are expensed to cost of revenue as the Company satisfies its performance obligations by transferring the service to the customer. These costs, which are classified in “prepaid expenses and other current assets,” net of any long term portion included in “other non-current assets,” principally relate to direct costs that enhance resources under the Company’s demand response contracts that will be used in satisfying future performance obligations. The Company has evaluated related activity and has determined the costs to fulfill a contract to be immaterial and do not require disclosure.

Financial Statement Impact of Adopting ASC 606
The Company adopted ASC 606 using the modified retrospective method. After applying the new guidance to all contracts with customers that were not completed as of April 1, 2017, the Company has determined no changes in revenues or contract costs for which an adjustment would be required to accumulated deficit as of the adoption date. As a result of applying the modified retrospective method to adopt the new revenue guidance, the Company determined that the impact of adoption was not material and that no adjustments would need to be made to accounts to the consolidated balance sheet as of April 1, 2017.
Concentrations of Credit Risk
Concentrations of Credit Risk
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, 2019, one major customer represented approximately 20.9% of the Company’s net accounts receivable balance. As of March 31, 2019, one major customer represented 25.7% 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, 2019, Verizon Communications Inc., primarily through its subsidiary Oath Inc., represented 14.4% and 17.7% of net revenues, respectively. During the three and nine months ended December 31, 2018, Oath Inc. represented 28.8% and 31.1% of net revenues, respectively.
With respect to partner revenue concentration, the Company partners with mobile carriers and OEMs to deliver applications on our Ignite platform through the carrier network. During the three and nine months ended December 31, 2019, Verizon Wireless, a carrier partner, generated 37.5% and 40.3%, respectively; AT&T Inc., a carrier partner, including its Cricket subsidiary, generated 29.8% and 30.9%, respectively; and America Movil Inc., a carrier partner, primarily through its subsidiary TracFone Wireless Inc., generated 12.4% and 10%, respectively, of our net revenues. During the three and nine months ended December 31, 2018, Verizon Wireless, a carrier partner, generated 43.7% and 47.6%, respectively; and AT&T Inc., a carrier partner, including its Cricket subsidiary, generated 38.5% and 38.4%, 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.
Use of Estimates
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make certain estimates that impact the reported amounts in the consolidated financial statements and accompanying notes. 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 the facts and circumstances available at the time of filing. Actual results could differ materially from those estimates.
v3.19.3.a.u2
Consolidated Statements of Operations and Comprehensive Income / (Loss) (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Income Statement [Abstract]        
Net revenues $ 36,016 $ 30,411 $ 99,364 $ 76,377
Cost of revenues        
License fees and revenue share 21,576 19,195 59,997 50,213
Other direct costs of revenues 400 538 1,022 1,553
Total cost of revenues 21,976 19,733 61,019 51,766
Gross profit 14,040 10,678 38,345 24,611
Operating expenses        
Product development 2,783 2,428 8,312 8,174
Sales and marketing 2,815 1,962 7,534 5,711
General and administrative 4,310 3,832 12,212 9,215
Total operating expenses 9,908 8,222 28,058 23,100
Income from operations 4,132 2,456 10,287 1,511
Interest and other income / (expense), net        
Interest income / (expense), net 59 (194) 118 (648)
Foreign exchange transaction gain / (loss) 0 (2) 0 7
Change in fair value of convertible note embedded derivative liability 0 (1,476) 0 1,096
Change in fair value of warrant liability (870) (1,651) (10,601) 845
Loss on extinguishment of debt 0 (10) 0 (25)
Other income / (expense) (19) (43) 455 (169)
Total interest and other income / (expense), net (830) (3,376) (10,028) 1,106
Income / (loss) from continuing operations before income taxes 3,302 (920) 259 2,617
Income tax provision 41 216 6 157
Income / (loss) from continuing operations, net of taxes 3,261 (1,136) 253 2,460
Income / (loss) from discontinued operations 65 (212) (171) (1,612)
Net income / (loss) from discontinued operations, net of taxes 65 (212) (171) (1,612)
Net income / (loss) 3,326 (1,348) 82 848
Foreign currency translation adjustment (44) (5) (364) (5)
Comprehensive income / (loss) $ 3,282 $ (1,353) $ (282) $ 843
Basic and diluted net income / (loss) per common share        
Continuing operations (in dollars per share) $ 0.04 $ (0.01) $ 0.00 $ 0.03
Discontinued operations (in dollars per share) 0.00 0.00 0.00 (0.02)
Net income / (loss) (in dollars per share) $ 0.04 $ (0.01) $ 0.00 $ 0.01
Weighted-average common shares outstanding, basic 85,876 77,645 83,869 76,977
Weighted-average common shares outstanding, diluted 92,472 77,645 89,759 79,371
v3.19.3.a.u2
Liquidity
9 Months Ended
Dec. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Liquidity
Liquidity
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("US GAAP"), which contemplate continuation of the Company as a going concern.

Our primary sources of liquidity have historically been cash from operations, issuance of common stock, preferred stock, and debt. As of December 31, 2019, we had cash, including restricted cash, totaling approximately $33,879.

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 Agreement with the Bank. The Credit Agreement, as amended, provides for up to a $20,000 total revolving credit facility, subject to draw limitations derived from current levels of eligible domestic receivables. Please refer to Note 8. "Debt" for more details.
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 Credit Agreement. In addition, the Company may raise additional capital through future equity or, subject to restrictions contained in the 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 2020 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 has sufficient cash and capital resources to continue to operate its business for at least twelve months from the issuance 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.
v3.19.3.a.u2
Geographic Information (Tables)
9 Months Ended
Dec. 31, 2019
Segment Reporting [Abstract]  
Schedule of Net Revenue by Geography
The following table sets forth geographic information on our net revenues for the three and nine months ended December 31, 2019 and 2018. Net revenues by geography are based on the billing addresses of our customers.
 
 
Three months ended December 31,
 
 
2019
 
2018
 
 
(Unaudited)
Net revenues
 
 
 
 
     United States and Canada
 
$
22,486

 
$
20,952

     Europe, Middle East, and Africa
 
9,205

 
6,160

     Asia Pacific and China
 
3,731

 
2,312

     Mexico, Central America, and South America
 
594

 
987

Consolidated net revenues
 
$
36,016

 
$
30,411

 
 
 
 
 
 
 
Nine months ended December 31,
 
 
2019
 
2018
 
 
(Unaudited)
Net revenues
 
 
 
 
     United States and Canada
 
$
66,057

 
$
53,871

     Europe, Middle East, and Africa
 
24,129

 
13,244

     Asia Pacific and China
 
8,137

 
6,709

     Mexico, Central America, and South America
 
1,041

 
2,553

Consolidated net revenues
 
$
99,364

 
$
76,377

v3.19.3.a.u2
Discontinued Operations - Narrative (Details)
Jul. 01, 2018
USD ($)
Apr. 29, 2018
agreement
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]    
Number of disposition agreements | agreement   2
Pay Seller | Discontinued Operations    
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]    
Estimated earn out $ 0  
Gain / (loss) on sale $ 0  
Period of continuing involvement after disposal 3 years  
v3.19.3.a.u2
Fair Value Measurements
9 Months Ended
Dec. 31, 2019
Fair Value Disclosures [Abstract]  
Fair Value Measurements
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.
The Company’s financial liabilities as of the issuance date of the convertible notes on the initial measurement date of September 28, 2016 are presented below at fair value and were classified within the fair value hierarchy as follows:
 
 
Level 1
 
Level 2
 
Level 3
 
Balance at Inception
Financial Liabilities
 
 
 
 
 
 
 
 
Convertible note embedded derivative liability
 
$

 
$

 
$
3,693

 
$
3,693

Warrant liability
 

 

 
1,223

 
1,223

Total
 
$

 
$

 
$
4,916

 
$
4,916

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the liability. Considerable judgment is necessary to interpret market data and determine an estimated fair value. The use of different market assumptions or valuation methods may have a material effect on the estimated fair values. Fair value of the Notes was determined using the residual method of accounting whereby, first, a portion of the proceeds from the issuance of the Notes was allocated to derivatives embedded in the Notes and the warrants issued in connection with the issuance of the Notes, and the proceeds so allocated were accounted for as a convertible note embedded derivative liability and warrant liability, respectively, and second, the remainder of the proceeds from the issuance of the Notes was allocated to the convertible notes, resulting in an original debt discount amounting to $4,916. The convertible notes remained on the consolidated balance sheet at historical cost, accreted up for the amount of cumulative amortization of the debt discount over the life of the debt. The method of determining the fair value of the convertible note embedded derivative liability and warrant liability are described subsequently in this note. Market risk associated with the convertible note embedded derivative liability and warrant liability related to the potential reduction in fair value and negative impact to future earnings from an increase in price of the Company's common stock. Please refer to Note 8. "Debt" for more information.
The carrying amounts of certain financial instruments, such as cash equivalents, accounts receivable, accounts payable, and accrued liabilities, approximate fair value due to their relatively short maturities.
During the fiscal year ended March 31, 2019, all of the Notes were extinguished, the underlying indenture relieved, and all derivative liabilities, except warrants, related to the Notes settled. As such, as of December 31, 2019 and March 31, 2019, the Company’s financial liability presented below at fair value was classified within the fair value hierarchy as follows:
 
 
Level 1
 
Level 2
 
Level 3
 
Balance as of December 31, 2019
 
 
 
 
 
 
 
 
(Unaudited)
Financial Liabilities
 
 
 
 
 
 
 
 
Warrant liability
 
$

 
$

 
$
6,300

 
$
6,300

Total
 
$

 
$

 
$
6,300

 
$
6,300

 
 
Level 1
 
Level 2
 
Level 3
 
Balance as of March 31, 2019
Financial Liabilities
 
 
 
 
 
 
 
 
Warrant liability
 
$

 
$

 
$
8,013

 
$
8,013

Total
 
$

 
$

 
$
8,013

 
$
8,013

Convertible Note Embedded Derivative Liability
We evaluated the terms and features of our convertible notes and identified embedded derivatives (conversion options that contain “make-whole interest” provisions, fundamental change provisions, or down round conversion price adjustment provisions; collectively called the "convertible note embedded derivative liability") requiring bifurcation and accounting at fair value because the economic and contractual characteristics of the embedded derivatives met the criteria for bifurcation and separate accounting. ASC 815-10-15-83 (c) states that if terms implicitly or explicitly require or permit net settlement, then it can readily be settled net by means outside the contract, or it provides for delivery of an asset that puts the recipient in a position not substantially different from net settlement. The conversion features related to the convertible notes consist of a “make-whole interest” provision, fundamental change provision, and down round conversion price adjustment provisions, which, if the convertible notes were to be converted, would put the convertible note holder in a position not substantially different from net settlement. Given this fact pattern, the conversion features met the definition of embedded derivatives and required bifurcation and accounting at fair value.
The convertible note embedded derivative liability represented the fair value of the conversion option, fundamental change provision, and "make-whole interest" provisions, as well as the down round conversion price adjustment or conversion rate adjustment provisions of the convertible notes. There is no current observable market for these types of derivatives and, as such, the Company determined the fair value of the derivative liability using a lattice approach that incorporates a Monte Carlo simulation valuation model. A Monte Carlo valuation model considers the Company's future stock price, stock price volatility, probability of a change of control, and the trading information of the Company's common stock into which the notes are or may become convertible. The Company marked the derivative liability to market at the end of each reporting period due to the conversion price not being indexed to the Company's own stock.
Changes in the fair value of the convertible note embedded derivative liability were reflected in our Consolidated Statements of Operations and Comprehensive Income / (Loss) as “Change in fair value of convertible note embedded derivative liability.”
During the fiscal year ended March 31, 2019, all of the Notes were extinguished, the underlying indenture relieved, and all derivative liabilities related to the Notes settled.
Due to the valuation of the derivative liability being highly sensitive to the trading price of the Company's stock, the increase and decrease in the trading price of the Company's stock has the impact of increasing the loss and gain, respectively. During the three and nine months ended December 31, 2018, the Company recorded a (loss) and gain from change in fair value of convertible note embedded derivative liability of $(1,476) and $1,096, respectively, due to the increase in the Company's closing stock price during the three months ended December 31, 2018 from $1.24 to $1.83 and due to the decrease in the Company's closing stock price during the nine months ended December 31, 2018 from $2.01 to $1.83. In addition to the Company's stock price being the primary driver, valuation of the derivative liability is also impacted by the conversion of underlying notes and associated warrants. See Note 8. "Debt" for more information regarding the conversion of Convertible Notes during fiscal years 2018 and 2019.

Warrant Liability

The Company issued detachable warrants with the convertible notes issued on September 28, 2016. The Company accounts for its warrants issued in accordance with US GAAP accounting guidance under ASC 815 applicable to derivative instruments, which requires every derivative instrument within its scope to be recorded on the balance sheet as either an asset or liability measured at its fair value, with changes in fair value recognized in earnings. Based on this guidance, the Company determined that these warrants did not meet the criteria for classification as equity. Accordingly, the Company classified the warrants as long-term liabilities until one year from the maturity date when the liability was re-classified to current. The warrants are subject to re-measurement at each balance sheet date, with any change in fair value recognized as a component of other income (expense), net in the Consolidated Statements of Operations and Comprehensive Income / (Loss). We estimated the fair value of these warrants at the respective balance sheet dates using a Black-Scholes model that considers the Company's future stock price. Option pricing models employ subjective factors to estimate warrant liability and, therefore, the assumptions used in the model are judgmental.
Changes in the fair value of the warrant liability are primarily related to the change in price of the underlying common stock of the Company and is reflected in our Consolidated Statements of Operations and Comprehensive Income / (Loss) as “Change in fair value of warrant liability.”
The following table provides a reconciliation of the beginning and ending balances for the warrant liability measured at fair value using significant unobservable inputs (Level 3):
 
 
Level 3
Balance at March 31, 2019
 
$
8,013

Change in fair value of warrant liability
 
10,601

De-recognition on exercises
 
(12,314
)
Balance at December 31, 2019
 
$
6,300


Due to the valuation of the derivative liability being highly sensitive to the trading price of the Company's stock, the increase and decrease in the trading price of the Company's stock has the impact of increasing the loss and gain, respectively. During the three and nine months ended December 31, 2019, the Company recorded a loss from change in fair value of warrant liability of $870 and $10,601, respectively, due to the increase in the Company's closing stock price during the three months ended December 31, 2019 from $6.45 to $7.13 and during the nine months ended December 31, 2019 from $3.78 to $7.13. During the three and nine months ended December 31, 2018, the Company recorded a (loss) and gain from change in fair value of warrant liability of $(1,651) and $845, respectively, due to the increase in the Company's closing stock price during the three months ended December 31, 2018 from $1.24 to $1.83 and due to the decrease in the Company's closing stock price during the nine months ended December 31, 2018 from $2.01 to $1.83.
The market-based assumptions and estimates used in valuing the warrant liability include the following:
 
December 31, 2019
Stock price volatility
60
%
Stock price (per share)
$7.13
Expected term
0.73 years

Risk-free rate (1)
1.59
%
(1) The Black-Scholes model assumes the continuously compounded equivalent (CCE) interest rate of 1.59% based on the 1-year U.S. Treasury securities as of the valuation date. 
Changes in valuation assumptions can have a significant impact on the valuation of the warrant liability. For example, all other things being equal, a decrease/increase in our stock price, probability of change of control, or stock price volatility decreases/increases the valuation of the liability, respectively, whereas a decrease/increase in risk-free interest rates increases/decreases the valuation of the liability, respectively.
v3.19.3.a.u2
Accounts Receivable
9 Months Ended
Dec. 31, 2019
Receivables [Abstract]  
Accounts Receivable
Accounts Receivable
 
 
December 31, 2019
 
March 31, 2019
 
 
(Unaudited)
 
 
Billed
 
$
13,314

 
$
11,833

Unbilled
 
14,481

 
11,769

Allowance for doubtful accounts
 
(1,101
)
 
(895
)
Accounts receivable, net
 
$
26,694

 
$
22,707


Billed accounts receivable represents amounts billed to customers that have yet to be collected. Unbilled accounts receivable represents revenue recognized but billed after period end. All unbilled receivables as of December 31, 2019 and March 31, 2019 are expected to be billed and collected within twelve months.
The Company recorded $56 and $184 of bad debt expense during the three and nine months ended December 31, 2019, respectively, and $59 and $229 of bad debt expense during the three and nine months ended December 31, 2018, respectively.
v3.19.3.a.u2
Income Taxes
9 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
Our 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, 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 months ended December 31, 2019, a tax provision of $41 and $6, respectively, resulted in an effective tax rate of 1.2% and 2.3%, respectively. Differences in the tax provision and the statutory rate are primarily due to changes in the valuation allowance.
During the three and nine months ended December 31, 2018, a tax provision of $216 and $157, respectively, resulted in an effective tax rate of (23.5)% and 6.0%, respectively. Differences in the tax provision and statutory rate are primarily due to changes in the valuation allowance.
v3.19.3.a.u2
Capital Stock Transactions - Narrative (Details) - USD ($)
$ / shares in Units, $ in Thousands
1 Months Ended 3 Months Ended 9 Months Ended
Jul. 31, 2019
May 31, 2019
Jun. 30, 2018
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Mar. 31, 2019
Class Of Stock [Line Items]                
Series A convertible preferred stock authorized (in shares)       2,000,000   2,000,000   2,000,000
Series A convertible preferred stock, par value (in dollars per share)       $ 0.0001   $ 0.0001   $ 0.0001
Series A convertible preferred stock issued (in shares)       100,000   100,000   100,000
Total unrecognized stock base compensation expense       $ 3,547 $ 2,194 $ 3,547 $ 2,194  
Unvested stock options, weighted average period           2 years 1 month 28 days 2 years 5 days  
Equity Option                
Class Of Stock [Line Items]                
Options exercised (in shares)           2,169,876    
Restricted Stock                
Class Of Stock [Line Items]                
Vesting period 1 year 3 years 3 years          
Awarded (in shares) 75,494 109,416 232,558     184,910    
Fair value of shares issued $ 421              
Restricted Stock | Minimum                
Class Of Stock [Line Items]                
Vesting period           3 months    
Restricted Stock | Maximum                
Class Of Stock [Line Items]                
Vesting period           2 years    
Time Condition RSAs                
Class Of Stock [Line Items]                
Compensation expense       105 $ 123 $ 318 $ 365  
Non Vested Restricted Stock                
Class Of Stock [Line Items]                
Awarded (in shares)           75,494    
Total unrecognized stock base compensation expense       $ 246   $ 246    
Unvested stock options, weighted average period           7 months    
Convertible Preferred Stock                
Class Of Stock [Line Items]                
Series A convertible preferred stock authorized (in shares)       2,000,000   2,000,000    
Series A convertible preferred stock, par value (in dollars per share)       $ 0.0001   $ 0.0001    
Series A convertible preferred stock issued (in shares)       100,000   100,000    
Aggregate shares upon conversion (in shares)           20,000    
Liquidation preference (in dollars per share)       $ 10   $ 10    
v3.19.3.a.u2
Description of Stock Plans - Summary of Stock Option Activity (Details) - Stock Option - USD ($)
$ / shares in Units, $ in Thousands
9 Months Ended 12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Mar. 31, 2019
Number of Shares (in shares)      
Beginning Balance (in shares) 9,128,885    
Granted (in shares) 1,738,750 1,349,925  
Forfeitures/cancellations (in shares) (397,321)    
Exercised (in shares) (2,169,876)    
Ending Balance (in shares) 8,300,438   9,128,885
Vested and expected to vest (net of estimated forfeitures) (in shares) 7,413,546    
Exercisable (in shares) 5,119,274    
Weighted Average Exercise Price ($ per share)      
Options outstanding (in dollars per share) $ 1.80    
Granted (in dollars per share) 4.34    
Forfeited/Cancelled (in dollars per share) 1.78    
Exercised (in dollars per share) 1.72    
Options outstanding (in dollars per share) 2.36   $ 1.80
Vested and expected to vest (net of estimated forfeitures) (in dollars per share) 2.29    
Exercisable (in dollars per share) $ 2.15    
Weighted Average Remaining Contractual Life (in years)      
Outstanding 7 years 1 month 25 days   7 years 3 months 21 days
Vested and expected to vest (net of estimated forfeitures) 6 years 11 months 18 days    
Exercisable, December 31, 2019 6 years 3 months 10 days    
Aggregate Intrinsic Value (in thousands)      
Outstanding $ 39,656   $ 16,347
Vested and expected to vest (net of estimated forfeitures) 35,900    
Exercisable, December 31, 2019 $ 25,517    
v3.19.3.a.u2
Description of Business (Details)
device in Millions, application_preload in Billions
9 Months Ended
Dec. 31, 2019
partnership
segment
device
application_preload
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Number of application pre-loads | application_preload 3
Number of devices | device 369
Number of Operator and OEM partnerships | partnership 35
Number of reportable segments | segment 1
v3.19.3.a.u2
Discontinued Operations - Statements of Operations and Comprehensive Income / (Loss) (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]        
Income / (loss) from discontinued operations before income taxes $ 65 $ (212) $ (171) $ (1,612)
Income / (loss) from discontinued operations, net of taxes $ 65 $ (212) $ (171) $ (1,612)
Basic and diluted net income / (loss) per common share (in dollars per share) $ 0.00 $ 0.00 $ 0.00 $ (0.02)
Discontinued Operations        
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]        
Net revenues $ 0 $ 3 $ 0 $ 3,880
Total cost of revenues (102) 0 (102) 3,070
Gross profit 102 3 102 810
Product development 0 37 62 703
Sales and marketing 0 7 0 350
General and administrative 37 160 122 1,212
Income / (loss) from operations 65 (201) (82) (1,455)
Interest and other income / (expense), net 0 (11) (89) (157)
Income / (loss) from discontinued operations before income taxes 65 (212) (171) (1,612)
Income / (loss) from discontinued operations, net of taxes 65 (212) (171) (1,612)
Comprehensive income / (loss) $ 65 $ (212) $ (171) $ (1,612)
Basic and diluted net income / (loss) per common share (in dollars per share) $ 0.00 $ 0.00 $ 0.00 $ (0.02)
Weighted-average common shares outstanding, basic 85,876 77,645 83,869 76,977
Weighted-average common shares outstanding, diluted 92,472 77,645 89,759 79,371
v3.19.3.a.u2
Net Income / (Loss) Per Share
9 Months Ended
Dec. 31, 2019
Earnings Per Share [Abstract]  
Net Income / (Loss) Per Share
Net Income / (Loss) Per Share
Basic net income / (loss) per share is calculated by dividing net income / (loss) by the weighted-average number of shares of common stock outstanding during the period, less shares subject to repurchase, and excludes any dilutive effects of employee stock-based awards in periods where the Company had net losses. Because the Company was in a net loss position for the three months ended December 31, 2018, all potentially dilutive shares of common stock were determined to be anti-dilutive and, accordingly, were not included in the calculation of diluted net loss per share. For the nine months ended December 31, 2018, and the three and nine months ended December 31, 2019, the Company was in a net income position and has included the dilutive effect of employee stock-based awards using the treasury method and assuming an average stock price over the periods of $1.55, $7.44, and $5.90, respectively .
The following table sets forth the computation of net income / (loss) 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,
 
 
2019
 
2018
 
2019
 
2018
Income / (loss) from continuing operations, net of taxes
 
$
3,261

 
$
(1,136
)
 
$
253

 
$
2,460

Weighted-average common shares outstanding, basic
 
85,876

 
77,645

 
83,869

 
76,977

Weighted-average common shares outstanding, diluted
 
92,472

 
77,645

 
89,759

 
79,371

Basic and diluted net income / (loss) per common share
 
$
0.04

 
$
(0.01
)
 
$

 
$
0.03

Common stock equivalents included in net income per diluted share
 
6,596

 

 
5,890

 
2,394

Common stock equivalents excluded from net loss per diluted share because their effect would have been anti-dilutive
 

 
2,485

 

 

v3.19.3.a.u2
Debt
9 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
Debt
Debt
Convertible Notes
On September 28, 2016, the Company sold to BTIG, LLC (the "Initial Purchaser") $16,000 aggregate principal amount of 8.75% convertible notes maturing on September 23, 2020 (the "Notes"), unless converted, repurchased, or redeemed in accordance with their terms prior to such date. The $16,000 aggregate principal received from the issuance of the Notes was initially allocated between long-term debt of $11,084, convertible note embedded derivative liability of $3,693 (see Note 9. "Fair Value Measurements" for more information), and warrant liability of $1,223 (see Note 9. "Fair Value Measurements" for more information), within the consolidated balance sheet. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the liability. Fair value of the Notes was determined using the residual method of accounting whereby, first, a portion of the proceeds from the issuance of the Notes was allocated to derivatives embedded in the Notes and the warrants issued in connection with the issuance of the Notes, and the proceeds so allocated were accounted for as a convertible note embedded derivative liability and warrant liability, respectively (see Note 9. "Fair Value Measurements" for more information), and second, the remainder of the proceeds from the issuance of the Notes was allocated to the convertible notes, which resulted in an original-issue debt discount of $4,916. At the close of the issuance of the Notes on September 28, 2016, the Company incurred $1,700 in debt issuance costs directly related to the issuance of the Notes, which, in accordance with ASU 2015-03, the Company recorded as a direct reduction to the face value of the Notes and amortized over the life of the Notes as a component of interest expense on the Consolidated Statements of Operations and Comprehensive Income / (Loss). During the three months ended December 31, 2016 the Company further incurred $212 in costs directly associated with the issuance of the Notes for the preparation and filing of a registration statement on Form S-1 to register the underlying common stock related to the Notes issued and related warrants issued along with the Notes. This was required to be done in accordance with the terms of the Indenture (as defined below).
The Company sold the Notes to the Initial Purchaser at a purchase price of 92.75% of the principal amount. The initial purchaser also received an additional 250,000 warrants on the same terms as the warrants issued with the Notes (as detailed below) and has the right to receive 2.5% of any cash consideration received by the Company in connection with a future exercise of any of the warrants issued with the Notes, further noting that this liability has been accrued and is immaterial. The Notes were issued under an Indenture dated September 28, 2016, as amended and supplemented (the "Indenture"), between Digital Turbine, Inc., US Bank National Association, as trustee, and certain wholly-owned subsidiaries of the Company, specifically, DT USA, DT Media, DT EMEA, and DT APAC (collectively referred to as the "Guarantors"). The Notes were senior unsecured obligations of the Company and bore interest at a rate of 8.75% per year, payable semiannually in arrears on March 15th and September 15th of each year, beginning on March 15, 2017. The Notes were unconditionally guaranteed by the Guarantors as to the payment of principal, premium, if any, and interest on a senior unsecured basis. The Notes were issued with an initial conversion price equal to $1.364 per share of the Company's common stock, subject to proportional adjustment for adjustments to outstanding common stock and anti-dilution provisions in case of dividends or distributions, stock split or combination, or if the Company issued or sold shares of common stock at a price per share less than the conversion price on the trading day immediately preceding such issuance or sale.
Each purchaser of the Notes also received warrants to purchase 256.60 shares of the Company's common stock for each $1 in Notes purchased, or up to 4,105,600 warrants in the aggregate, in addition to the 250,000 warrants issued to the Initial Purchaser, as described above. The warrants were issued under a Warrant Agreement (the "Warrant Agreement"), dated as of September 28, 2016, between Digital Turbine, Inc. and US Bank National Association as the warrant agent.
The warrants were immediately exercisable on the date of issuance at an initial exercise price of $1.364 per share and will expire on September 23, 2020. The exercise price is subject to proportional adjustment for adjustments to outstanding common stock and anti-dilution provisions in case of dividends or distributions, stock split or combination, or if the Company issues or sells shares of common stock at a price per share less than the conversion price on the trading day immediately preceding such issuance or sale. Certain caps on the number of shares that could be issued under the Notes and the Warrants were effectively lifted by our stockholders approving the full issuance of all potentially issuable shares at our January 2017 annual meeting of stockholders, and again at our January 2018 annual meeting of stockholders in respect of our May 2017 supplemental indenture.
In the event of a fundamental change, as set forth in the Warrant Agreement, the holders can elect to exercise their warrants or to receive an amount of cash based on a Black-Scholes calculation of the value of such warrants.
The Company received net cash proceeds of $14,316 after deducting the Initial Purchaser's discounts and commissions and the estimated offering expenses payable by Digital Turbine. The net proceeds from the issuance of the Notes were used to repay $11,000 of secured indebtedness, retiring such debt in its entirety, and were otherwise used for general corporate purposes and working capital.
In May 2017, the Company entered a supplemental indenture and warrant amendment, described in its Current Report on Form 8-K filed May 24, 2017, and as described further below under "Senior Secured Credit Facility."
During the year ended March 31, 2018, holders of $10,300 of Notes elected to convert such Notes. These Notes were extinguished by issuing shares of common stock, based on the applicable conversion price of $1.364 per share, plus additional shares of common stock and cash to satisfy the early conversion payments required by the Indenture. Associated with this conversion, gross debt, net of debt discount and capitalized debt issuance costs of $2,591 and $1,019, respectively, was extinguished for a net debt extinguishment of $6,690. In total, 8,624,445 shares of common stock were issued and $247 in cash was paid to settle these positions. This resulted in an adjustment of approximately $14,238 to additional paid-in capital to reflect the shares issued upon conversion. A loss on extinguishment of debt of $1,785 was recorded as a result of the difference in carrying value of the debt, inclusive of the associated debt discount and capitalized debt issuance costs, compared to the fair market value of the consideration given comprising both common stock issued and cash paid. The proportionate amount of the underlying derivative instrument was also extinguished, as calculated on the respective conversion dates. See Note 9. "Fair Value Measurements" for more information.

During the year ended March 31, 2019, holders of the remaining $5,700 of Notes elected to convert such Notes. These Notes were extinguished by issuing shares of common stock, based on the applicable conversion price of $1.364 per share, plus additional shares of common stock and cash to satisfy the early conversion payments required by the Indenture. Associated with this conversion, gross debt, net of debt discount and capitalized debt issuance costs of $1,360, was extinguished for a net debt extinguishment of $4,340. In total, 4,446,265 shares of common stock were issued to settle these positions. This resulted in an adjustment of approximately $10,582 to additional paid-in capital to reflect the shares issued upon conversion. A loss on extinguishment of debt of $431 was recorded as a result of the difference in carrying value of the debt, inclusive of the associated debt discount and capitalized debt issuance costs, compared to the fair market value of the consideration given comprising both common stock issued and cash paid. The proportionate amount of the underlying derivative instrument was also extinguished, as calculated on the respective conversion dates. See Note 9. "Fair Value Measurements" for more information.

As of March 31, 2019, all of the Notes have been extinguished, the underlying indenture relieved, and all derivative liabilities related to the Notes settled.

Senior Secured Credit Facility

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 revolving credit facility.

On May 22, 2019, the Company amended its existing Credit Agreement with the Bank, to extend the term of the agreement and to modify the covenants as detailed below. The Credit Agreement, as amended, provides 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, mature in two years, or May 22, 2021, and accrue interest at prime plus 0.50%, subject to a 6.00% floor, with the prime rate defined as the greater of the prime rate published in the Wall Street Journal or 5.50%. The Credit Agreement, as amended, also carries an annual facility fee of 0.20% of our available credit limit, and an unused line fee of 0.10% per annum. The obligations under the Credit Agreement are 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, are additional co-borrowers.

The Credit Agreement contains customary covenants, representations, indemnities, and events of default. In addition to customary covenants, including restrictions on payments (subject to specified exceptions), and restrictions on indebtedness (subject to specified exceptions), the Credit Agreement requires the Company to comply with the following financial covenants:

(1) Maintain a Quick Ratio, measured at the end of each month during which any advances are outstanding, of at least:

0.75:1.00        May 31, 2019 - August 31, 2019

0.80:1.00        September 1, 2019 - February 28, 2020

0.85:1.00        March 1, 2020 - August 31, 2020

0.90:1.00        September 1, 2020 and thereafter

(2) Trailing six-month earnings before depreciation, amortization, stock compensation, non-cash warrant and derivative liability expense, and any other onetime non-recurring expenses the Bank deems appropriate ("EBDAS") of not less than $1, tested as of each fiscal quarter end during which any advances are outstanding.
The Company was in compliance with all covenants of the Credit Agreement as of December 31, 2019.
At December 31, 2019, there was no outstanding principal on the Credit Agreement.
Interest Income / (Expense)
The Company recorded $59 and $118 of interest income, net, during the three and nine months ended December 31, 2019, respectively. This is comprised of interest earned on cash balances, partially offset by amortization of annual facility fees on the Credit Agreement.
In the prior fiscal year, inclusive of the Notes issued on September 28, 2016 and the Credit Agreement entered into on May 23, 2017, the Company recorded $131 and $397 of interest expense during the three and nine months ended December 31, 2018, respectively.
Additionally in the prior fiscal year, aggregate debt discount and debt issuance cost amortization related to the Notes, detailed in the paragraphs above, are reflected on the Consolidated Statements of Operations and Comprehensive Income / (Loss) as interest expense. Inclusive of this amortization of $63 and $251 recorded during the three and nine months ended December 31, 2018, respectively, the Company recorded $194 and $648 of total interest expense for the three and nine months ended December 31, 2018, respectively.
v3.19.3.a.u2
Discontinued Operations
9 Months Ended
Dec. 31, 2019
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations
Discontinued Operations
On April 29, 2018, the Company entered into two distinct disposition agreements with respect to selected 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 as of 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 disclosed in the Company’s Form 8-K filed on May 1, 2018 with the SEC. The transaction was completed on July 1, 2018. With the sale of these assets, the Company has 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, the Company has determined that the estimated earn out from the Pay Purchaser to be $0. As all the assets being transferred had been fully impaired prior to the closing of the transaction, the gain/loss on sale related to the Pay Agreement transaction was $0. Furthermore, the Company retained certain receivables and payables for content delivered for the benefit of the partner to the material contract, where these certain receivables and payables were all recognized prior to the closing of the Pay Agreement. These amounts are presented below as assets and liabilities held for disposal. As of December 31, 2019, the Company has determined there to be uncertainty surrounding the collectability of the receivables due to ongoing discussions with the business partner. If at a later date it is determined that the receivables recorded are not collectible due to disputes surrounding the content delivered, the related payables would likewise not be payable. At this time, the Company is negotiating settlement but does not have enough information to reasonably estimate which receivables and payables, if any, may be un-collectible and un-payable, respectively. The total net exposure to the Company if all of the remaining receivables and payables are determined to be un-collectible and un-payable, respectively, is immaterial. These assets and liabilities remain on our books as a component of discontinued operations as of December 31, 2019.
DT Media, a wholly-owned subsidiary of the Company, entered into an Asset Purchase Agreement (the “A&P Agreement”), dated as of 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 a period of three years, as disclosed in the Company’s Form 8-K filed on 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 has exited the operating segment of the business previously referred to as the A&P business, which was previously part of Advertising, the Company's sole continuing reporting unit. No gain or loss on sale was recognized related to this divestiture. All transferred assets and liabilities, with the exception of goodwill, were fully amortized prior to entering into the sale agreement. As the consideration given by the purchaser was already materially determined at March 31, 2018, goodwill was impaired to the estimated future cash flows of the divested business, which was effectively the purchase price.
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,
 
 
2019
 
2018
 
2019
 
2018
Net revenues
 
$

 
$
3

 
$

 
$
3,880

Total cost of revenues
 
(102
)
 

 
(102
)
 
3,070

Gross profit
 
102

 
3

 
102

 
810

Product development
 

 
37

 
62

 
703

Sales and marketing
 

 
7

 

 
350

General and administrative
 
37

 
160

 
122

 
1,212

Income / (loss) from operations
 
65

 
(201
)
 
(82
)
 
(1,455
)
Interest and other income / (expense), net
 

 
(11
)
 
(89
)
 
(157
)
Income / (loss) from discontinued operations before income taxes
 
65

 
(212
)
 
(171
)
 
(1,612
)
Income / (loss) from discontinued operations, net of taxes
 
65

 
(212
)
 
(171
)
 
(1,612
)
Comprehensive income / (loss)
 
$
65

 
$
(212
)
 
$
(171
)
 
$
(1,612
)
Basic and diluted net income / (loss) per common share
 
$

 
$

 
$

 
$
(0.02
)
Weighted-average common shares outstanding, basic
 
85,876

 
77,645

 
83,869

 
76,977

Weighted-average common shares outstanding, diluted
 
92,472

 
77,645

 
89,759

 
79,371

Details on assets and liabilities classified as held-for-disposal in the accompanying consolidated balance sheets are presented in the following table:
 
 
December 31, 2019
 
March 31, 2019
 
 
(Unaudited)
 
 
Assets held for disposal
 
 
 
 
Accounts receivable, net of allowances of $1,542 and $1,589, respectively
 
$
1,525

 
$
1,883

Property and equipment, net
 
2

 
143

Total assets held for disposal
 
$
1,527

 
$
2,026

 
 
 
 
 
Liabilities held for disposal
 
 
 
 
Accounts payable
 
$
2,926

 
$
3,158

Accrued license fees and revenue share
 
335

 
537

Accrued compensation
 
170

 
226

Other current liabilities
 

 
3

Total liabilities held for disposal
 
$
3,431

 
$
3,924


Assets and liabilities held for disposal as of December 31, 2019 and March 31, 2019 are classified as current since we expect the dispositions to be completed within one year.

The following table provides reconciling cash flow information for our discontinued operations:
 
 
Nine months ended December 31,
 
 
2019
 
2018
 
 
(Unaudited)
 
(Unaudited)
Cash flows from operating activities
 
 
 
 
Net loss from discontinued operations, net of taxes
 
$
(171
)
 
$
(1,612
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
 
19

 
247

Impairment of goodwill
 

 
309

Change in allowance for doubtful accounts
 
(47
)
 
(380
)
Loss on disposal of fixed assets
 
104

 

Stock-based compensation
 

 
37

(Increase) / decrease in assets:
 
 
 
 
Accounts receivable
 
405

 
5,164

Prepaid expenses and other current assets
 

 
95

Increase / (decrease) in liabilities:
 
 
 
 
Accounts payable
 
(232
)
 
(4,675
)
Accrued license fees and revenue share
 
(202
)
 
(1,991
)
Accrued compensation
 
(56
)
 
(302
)
Other current liabilities
 
35

 
(328
)
Cash used in operating activities
 
(145
)
 
(3,436
)
 
 
 
 
 
Cash used in discontinued operations
 
$
(145
)
 
$
(3,436
)
v3.19.3.a.u2
Description of Stock Plans - Schedule of Market-based Assumptions (Details)
9 Months Ended
Dec. 31, 2019
Minimum  
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]  
Expected life of the options 5 years 4 months 6 days
Maximum  
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]  
Expected life of the options 9 years 9 months 29 days
Risk-free interest rate | Minimum  
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]  
Risk-free interest rate 0.0167
Risk-free interest rate | Maximum  
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]  
Risk-free interest rate 0.0225
Expected volatility | Minimum  
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]  
Risk-free interest rate 0.65
Expected volatility | Maximum  
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]  
Risk-free interest rate 0.66
Expected dividend yield  
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]  
Risk-free interest rate 0
Expected forfeitures | Minimum  
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]  
Risk-free interest rate 0.27
Expected forfeitures | Maximum  
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]  
Risk-free interest rate 0.29
v3.19.3.a.u2
Description of Stock Plans - Narrative (Details) - USD ($)
$ / shares in Units, $ in Thousands
1 Months Ended 3 Months Ended 9 Months Ended
Jul. 31, 2019
May 31, 2019
Jun. 30, 2018
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Mar. 31, 2019
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]                
Allocated stock compensation expense       $ 917 $ 631 $ 2,514 $ 1,781  
Weighted average grant-date fair value (in dollars per share)       $ 4.34 $ 1.64 $ 4.34 $ 1.64  
Total unrecognized stock base compensation expense       $ 3,547 $ 2,194 $ 3,547 $ 2,194  
Unvested stock options, weighted average period           2 years 1 month 28 days 2 years 5 days  
Maximum                
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]                
Option plan, term           10 years    
Equity Option                
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]                
Granted (in shares)           1,738,750 1,349,925  
Forfeitures/cancellations (in shares)           397,321    
Restricted Stock                
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]                
Awarded (in shares) 75,494 109,416 232,558     184,910    
Vesting period 1 year 3 years 3 years          
Fair value of shares on date of issuance   $ 413 $ 400          
Allocated stock compensation expense       $ 68 $ 50 $ 152 $ 90  
Restricted Stock | Minimum                
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]                
Vesting period           3 months    
Restricted Stock | Maximum                
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]                
Vesting period           2 years    
Stock Option Plan 2011                
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]                
Reserved for future issuance (in shares)       20,000,000   20,000,000    
Available for issuance (in shares)       7,159,118   7,159,118   8,685,457
Stock Incentive Plans | Minimum                
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]                
Option plan, term           3 years    
Stock Incentive Plans | Maximum                
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]                
Option plan, term           4 years    
v3.19.3.a.u2
Net Income / (Loss) Per Share (Details) - USD ($)
$ / shares in Units, shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]        
Income / (loss) from continuing operations, net of taxes $ 3,261 $ (1,136) $ 253 $ 2,460
Weighted-average common shares outstanding, basic 85,876 77,645 83,869 76,977
Weighted-average common shares outstanding, diluted 92,472 77,645 89,759 79,371
Basic and diluted net income / (loss) per common share (in dollars per share) $ 0.04 $ (0.01) $ 0.00 $ 0.03
Common stock equivalents included in net income per diluted share (in shares) 6,596 0 5,890 2,394
Common stock equivalents excluded from net loss per diluted share because their effect would have been anti-dilutive (in shares) 0 2,485 0 0
Employee Stock        
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]        
Average share price (in dollars per share) $ 7.44   $ 5.90 $ 1.55
v3.19.3.a.u2
Leases - Additional Information (Details)
$ in Thousands
9 Months Ended
Dec. 31, 2019
USD ($)
renewal_option
Leases [Abstract]  
Number of renewal options, minimum | renewal_option 1
Right-of-use assets | $ $ 2,029
Weighted average discount rate 6.00%
Weighted-average remaining lease term 4 years 3 months 22 days
v3.19.3.a.u2
Debt - Interest Income / (Expense) (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Debt Instrument [Line Items]        
Interest income $ 59 $ (194) $ 118 $ (648)
Amortization of debt discount and debt issuance costs     $ 0 251
Interest expense   194   648
Convertible notes        
Debt Instrument [Line Items]        
Interest expense, debt   131   397
Amortization of debt discount and debt issuance costs   $ 63   $ 251
v3.19.3.a.u2
Property and Equipment (Tables)
9 Months Ended
Dec. 31, 2019
Property, Plant and Equipment [Abstract]  
Schedule of Property and Equipment
 
 
December 31, 2019
 
March 31, 2019
 
 
(Unaudited)
 
 
Computer-related equipment
 
$
9,691

 
$
7,077

Furniture and fixtures
 
414

 
223

Leasehold improvements
 
623

 
558

Property and equipment, gross
 
10,728

 
7,858

Accumulated depreciation
 
(5,612
)
 
(4,428
)
Property and equipment, net
 
$
5,116

 
$
3,430

v3.19.3.a.u2
Subsequent Event
9 Months Ended
Dec. 31, 2019
Subsequent Events [Abstract]  
Subsequent Event
Subsequent Event
On February 6, 2020, Digital Turbine Media, Inc. (“DT Media”), a wholly-owned subsidiary of the Company, entered into a Stock Purchase Agreement (the “Purchase Agreement”) with ACME Mobile, LLC (“ACME”), Mobile Posse, Inc., a wholly-owned subsidiary of ACME (“Mobile Posse”), and certain equityholders of ACME, pursuant to which DT Media would acquire (the “Acquisition”) all of the outstanding capital stock of Mobile Posse in exchange for an estimated total consideration of $66,000, payable as follows: (1) $41,500 in cash to be paid at closing, subject to purchase price adjustments, and (2) an estimated earn-out of $24,500, 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 is subject to change based on final results and calculations. Under the terms of the earn-out, over the Earn-Out Period, DT Media would 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 would be paid every three months with a true-up calculation and payment after the first nine months of the Earn-Out Period. The Purchase Agreement contains customary representations and warranties, covenants, closing conditions, and indemnification provisions. If the Acquisition does not close by March 16, 2020, under certain specified circumstances the Company would be obligated to pay ACME a $5,000 termination fee.
v3.19.3.a.u2
Summary of Significant Accounting Policies
9 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
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 U.S. Securities and Exchange Commission ("SEC") in Digital Turbine, Inc.'s Annual Report on Form 10-K for the fiscal year ended March 31, 2019. 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. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments of a normal recurring nature considered necessary to fairly state the financial position of Digital Turbine, Inc. and its consolidated subsidiaries at December 31, 2019, the results of their operations and corresponding comprehensive income / (loss) for the three and nine months ended December 31, 2019 and 2018, and their cash flows for the nine months ended December 31, 2019 and 2018. 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. The results of operations for the interim period are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2020.
Recently Issued Accounting Pronouncements
The significant accounting policies and recent accounting pronouncements were described in Note 4 of the consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended March 31, 2019. There have been no significant changes in or updates to the accounting policies since March 31, 2019. 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 February 2016, the FASB issued Account Standards Update ("ASU") 2016-02: Leases (Topic 842). This update changes lessee accounting to reflect the financial liability and right-of-use assets that are inherent to leasing an asset on the balance sheet. This guidance is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. As such, the Company adopted this standard during our quarter ended June 30, 2019 using the modified retrospective method, such that we will account for leases that commenced before the effective date of ASU No. 2016-02 in accordance with previous GAAP unless the lease is modified, except we will recognize right-of-use assets and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. The impact of adoption resulted in a gross-up of the Consolidated Balance Sheet with the creation of a right-of-use asset and a corresponding financial liability partially offset by the relief of other liability accounts related to the change in accounting standard. The impact on the Consolidated Statements of Operations and Comprehensive Income / (Loss) was negligible. The adoption of this standard did not have a material net impact on the Company's consolidated results of operations, financial condition, or cash flows. Please refer to Note 7. "Leases" for details.
Revenue from Contracts with Customers
The Company adopted Accounting Standards Codification ("ASC") 606 on April 1, 2018, and ASC 606 is effective from the period beginning April 1, 2016 using the modified retrospective method for all contracts not completed as of the effective date. For contracts that were modified before the effective date, the Company reflected the aggregate effect of all modifications when identifying performance obligations and allocating transaction price in accordance with practical expedient ASC 606-10-65-1-(f)-4, which did not have a material effect on the adjustment to accumulated deficit. The adoption of ASC 606 represents a change in accounting principle that will more closely align revenue recognition with the delivery of the Company's services and will provide financial statement readers with enhanced disclosures. In accordance with ASC 606, revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services.
To achieve this core principle, the Company applied the following five steps:
1) Identify the contract with a customer
A contract with a customer exists when (i) the Company enters into an enforceable contract with a customer that defines each party’s rights regarding the services to be transferred and identifies the payment terms related to these services, (ii) the contract has commercial substance and, (iii) the Company determines that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.
2) Identify the performance obligations in the contract
Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised services, the Company must apply judgment to determine whether promised services are capable of being distinct and distinct in the context of the contract. If these criteria are not met the promised services are accounted for as a combined performance obligation.
3) Determine the transaction price
The transaction price is determined based on the consideration to which the Company will be entitled in exchange for transferring services to the customer. None of the Company's contracts contain financing or variable consideration components.
4) Allocate the transaction price to performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price basis. The Company determines standalone selling price based on the price at which the performance obligation is sold separately. If the standalone selling price is not observable through past transactions, the Company estimates the standalone selling price taking into account available information such as market conditions and internally approved pricing guidelines related to the performance obligations.
5) Recognize revenue when or as the Company satisfies a performance obligation
The Company satisfies performance obligations at a point in time as discussed in further detail under "Disaggregation of Revenue" below. Revenue is recognized at the time the related performance obligation is satisfied by transferring a promised service to a customer.

Disaggregation of Revenue
All of the Company's performance obligations, and associated revenue, are generally transferred to customers at a point in time.
O&O Services
The Company’s Advertising business consists of one operating segment (O&O), an advertiser solution for unique and exclusive carrier and OEM inventory, which is comprised of services including:
Ignite, a mobile application management software that enables mobile operators and OEMs to control, manage, and monetize applications installed at the time of activation and over the life of a mobile device. Ignite allows mobile operators and OEMs to personalize the application activation experience for customers and monetize their home screens via Cost-Per-Install or CPI arrangements, Cost-Per-Placement or CPP arrangements, and/or Cost-Per-Action or CPA arrangements with third party advertisers. There are several different delivery methods available to operators and OEMs on first boot of the device: Wizard, Dynamic Installs, or Software Development Kit ("SDK"). Optional notification features are available throughout the life-cycle of the device, providing operators and OEMs additional opportunity for advertising revenue streams.

Other products and professional services directly related to the Ignite platform.
Carriers and OEMs
The Company generally offers these services under a vendor contract revenue share model or under a customer contract per device license fee model with carriers and OEMs for a two to four year software as a service ("SaaS") license agreement. These agreements typically include the following services: the access to the SaaS platform, hosting fees, solution features, and general support and maintenance. The Company has concluded that each promised service is delivered concurrently with all other promised service over the contract term and, as such, has concluded these promises are a single performance obligation that includes a series of distinct services that have the same pattern of transfer to the customer. Consideration for the Company’s license arrangements consist of fixed and usage based fees, invoiced monthly or quarterly. The Company's contracts do not include advance non-refundable fees. Monthly license fees are based on the number of devices on a per device license fee basis. Monthly hosting and maintenance fees are generally fixed. These monthly fees are subject to a service level agreement ("SLA"), which requires that the services are available to the customer based on a predefined performance criteria. If the services do not meet these criteria, monthly fees are subject to adjustment or refund. The Company satisfies its performance obligation by providing access to its SaaS platform over time and processing transactions. For non-usage based fees, the period of time over which the Company performs its obligations is inherently commensurate with the contract term. The performance obligation is recognized on time elapsed basis, by month for which the services are provided. For usage-based fees, revenue is recognized in the month in which the Company provides the usage to the customer.
Third-Party Advertisers
The Company generally offers these services under a customer contract Cost-Per-Install or CPI arrangements, Cost-Per-Placement or CPP arrangements, and/or Cost-Per-Action or CPA arrangements with third-party advertisers and developers, as well as advertising aggregators, generally in the form of insertion orders that specify the type of arrangement (as detailed above) at particular set budget amounts/restraints. These advertiser customer contracts are generally short term in nature at less than one year as the budget amounts are typically spent in full within this time period. These agreements typically include the delivery of applications through partner networks, defined as carriers or OEMs, to home screens of devices. The Company has concluded that the delivery of the advertisers application is delivered at a point in time and, as such, has concluded these deliveries are a single performance obligation. The Company invoices fees which are generally variable based on the arrangement, which would typically include the number of applications delivered at a specified price per application. For applications delivered, revenue is recognized in the month in which the Company delivers the application to the end consumer.
Professional Services
The Company offers professional services that support the implementation of its Ignite platform for carriers and OEMs, including technology development and integration services. These contracts generally include delivery and integration of the technology development product and revenue is recognized when formal acceptance is confirmed by the customer. Services are billed in one lump sum. For the majority of these contracts, for which the Company has the right to invoice the customer in an amount that directly corresponds with the value to the customer of the Company's performance to date, the Company recognizes revenue based on the amount billable to the customer in accordance with practical expedient ASC 606-10-55-18.
Costs to Obtain and Fulfill a Contract
The Company capitalizes commission expenses paid to internal sales personnel that are incremental to obtaining customer contracts. These costs are deferred in “prepaid expenses and other current assets,” net of any long-term portion included in “other non-current assets." The judgments made in determining the amount of costs incurred include whether the commissions are in fact incremental and would not have occurred absent the customer contract. Costs to obtain a contract are amortized as sales and marketing expense on a straight line basis over the expected period of benefit. These costs are periodically reviewed for impairment. The Company has evaluated related activity and have determined the costs to obtain a contract to be immaterial and do not require disclosure.
The Company capitalizes costs incurred to fulfill its contracts that i) relate directly to the contract, ii) are expected to generate resources that will be used to satisfy the Company’s performance obligation under the contract and iii) are expected to be recovered through revenue generated under the contract. Contract fulfillment costs are expensed to cost of revenue as the Company satisfies its performance obligations by transferring the service to the customer. These costs, which are classified in “prepaid expenses and other current assets,” net of any long term portion included in “other non-current assets,” principally relate to direct costs that enhance resources under the Company’s demand response contracts that will be used in satisfying future performance obligations. The Company has evaluated related activity and has determined the costs to fulfill a contract to be immaterial and do not require disclosure.

Financial Statement Impact of Adopting ASC 606
The Company adopted ASC 606 using the modified retrospective method. After applying the new guidance to all contracts with customers that were not completed as of April 1, 2017, the Company has determined no changes in revenues or contract costs for which an adjustment would be required to accumulated deficit as of the adoption date. As a result of applying the modified retrospective method to adopt the new revenue guidance, the Company determined that the impact of adoption was not material and that no adjustments would need to be made to accounts to the consolidated balance sheet as of April 1, 2017.
Concentrations of Credit Risk
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, 2019, one major customer represented approximately 20.9% of the Company’s net accounts receivable balance. As of March 31, 2019, one major customer represented 25.7% 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, 2019, Verizon Communications Inc., primarily through its subsidiary Oath Inc., represented 14.4% and 17.7% of net revenues, respectively. During the three and nine months ended December 31, 2018, Oath Inc. represented 28.8% and 31.1% of net revenues, respectively.
With respect to partner revenue concentration, the Company partners with mobile carriers and OEMs to deliver applications on our Ignite platform through the carrier network. During the three and nine months ended December 31, 2019, Verizon Wireless, a carrier partner, generated 37.5% and 40.3%, respectively; AT&T Inc., a carrier partner, including its Cricket subsidiary, generated 29.8% and 30.9%, respectively; and America Movil Inc., a carrier partner, primarily through its subsidiary TracFone Wireless Inc., generated 12.4% and 10%, respectively, of our net revenues. During the three and nine months ended December 31, 2018, Verizon Wireless, a carrier partner, generated 43.7% and 47.6%, respectively; and AT&T Inc., a carrier partner, including its Cricket subsidiary, generated 38.5% and 38.4%, 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.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make certain estimates that impact the reported amounts in the consolidated financial statements and accompanying notes. 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 the facts and circumstances available at the time of filing. Actual results could differ materially from those estimates.
v3.19.3.a.u2
Document and Entity Information - shares
9 Months Ended
Dec. 31, 2019
Feb. 05, 2020
Document And Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Company false  
Document Period End Date Dec. 31, 2019  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q3  
Entity Registrant Name DIGITAL TURBINE, INC.  
Entity Central Index Key 0000317788  
Current Fiscal Year End Date --03-31  
Entity Current Reporting Status Yes  
Entity Filer Category Accelerated Filer  
Entity Common Stock, Shares Outstanding   86,741,096
v3.19.3.a.u2
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
9 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Cash flows from operating activities    
Net income from continuing operations, net of taxes $ 253 $ 2,460
Adjustments to reconcile net income from continuing operations to net cash provided by / (used in) operating activities:    
Depreciation and amortization 1,484 2,145
Loss on disposal of fixed assets 4 0
Change in allowance for doubtful accounts 206 425
Amortization of debt discount and debt issuance costs 0 251
Stock-based compensation 2,044 1,416
Stock-based compensation for services rendered 470 365
Change in fair value of convertible note embedded derivative liability 0 (1,096)
Change in fair value of warrant liability 10,601 (845)
Loss on extinguishment of debt 0 25
(Increase) / decrease in assets:    
Accounts receivable (4,193) (7,626)
Deferred tax assets 40 157
Prepaid expenses and other current assets (829) (561)
Right-of-use assets (2,029)  
Increase / (decrease) in liabilities:    
Accounts payable 5,908 2,657
Accrued license fees and revenue share 59 3,258
Accrued compensation 855 (1,345)
Other current liabilities 3,459 788
Other non-current liabilities 1,823 55
Net cash provided by operating activities - continuing operations 20,155 2,529
Net cash used in operating activities - discontinued operations (145) (3,436)
Net cash provided by / (used in) operating activities 20,010 (907)
Cash flows from investing activities    
Capital expenditures (3,179) (1,781)
Net cash used in investing activities (3,179) (1,781)
Cash flows from financing activities    
Options and warrants exercised 6,353 223
Repayment of debt obligations 0 (50)
Net cash provided by financing activities 6,353 173
Effect of exchange rate changes on cash (364) (5)
Net change in cash 22,820 (2,520)
Cash and restricted cash, beginning of period 11,059 13,051
Cash and restricted cash, end of period 33,879 10,531
Supplemental disclosure of cash flow information    
Interest paid 0 290
Supplemental disclosure of non-cash financing activities    
Common stock of the Company issued for extinguishment of debt 0 1,190
Cashless exercise of warrants to purchase common stock of the Company $ 791 $ 0
v3.19.3.a.u2
Description of Stock Plans
9 Months Ended
Dec. 31, 2019
Share-based Payment Arrangement [Abstract]  
Description of Stock Plans
Description of Stock Plans
Employee Stock Plan
The Company is currently issuing stock awards 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. No future grants will be made under the previous plan, the 2007 Employee, Director and Consultant Stock Plan (the “2007 Plan”). The 2011 Plan and 2007 Plan are collectively referred to as "Digital Turbine's Incentive Plans." In the year ended March 31, 2015, in connection with the acquisition of Appia (i.e., DT Media), the Company assumed the Appia, Inc. 2008 Stock Incentive Plan (the “Appia Plan”). Digital Turbine’s Incentive Plans and the Appia Plan are all collectively referred to as the “Stock Plans.”
The 2011 Plan provides 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 (“SARs”), restricted stock, and restricted stock units (sometimes referred to individually or collectively as “Awards”). 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”).
The 2011 Plan reserves 20,000,000 shares for issuance, of which 7,159,118 and 8,685,457 remained available for future grants as of December 31, 2019 and March 31, 2019, respectively. The change over the comparative period represents stock option grants, stock option forfeitures/cancellations, and restricted shares/units of common stock of 1,738,750 shares, 397,321 shares, and 184,910 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 restricted or 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 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.
With respect to RSUs, the Company expensed $68 and $152 during the three and nine months ended December 31, 2019, respectively, and $50 and $90 during the three and nine months ended December 31, 2018, respectively.
Stock Option Agreements
Stock options granted under Digital Turbine's Stock 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 the Stock 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, 2019
 
9,128,885

 
$
1.80

 
7.31
 
$
16,347

Granted
 
1,738,750

 
4.34

 
 
 
 
Forfeited / Cancelled
 
(397,321
)
 
1.78

 
 
 
 
Exercised
 
(2,169,876
)
 
1.72

 
 
 
 
Options Outstanding, December 31, 2019
 
8,300,438

 
2.36

 
7.15
 
39,656

Vested and expected to vest (net of estimated forfeitures) at December 31, 2019 (a)
 
7,413,546

 
2.29

 
6.97
 
35,900

Exercisable, December 31, 2019
 
5,119,274

 
$
2.15

 
6.28
 
$
25,517

(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, 2019 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, 2019. 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, 2019 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
$0.51 - 1.00
 
1,591,790

 
$
0.73

 
6.84
 
828,032

 
$
0.73

$1.01 - 1.50
 
1,863,050

 
$
1.29

 
6.60
 
1,718,255

 
$
1.30

$1.51 - 2.00
 
1,024,212

 
$
1.67

 
8.31
 
492,253

 
$
1.66

$2.01 - 2.50
 
560,778

 
$
2.23

 
8.30
 
250,156

 
$
2.21

$2.51 - 3.00
 
535,958

 
$
2.59

 
4.34
 
535,958

 
$
2.59

$3.51 - 4.00
 
1,812,650

 
$
3.89

 
8.15
 
680,783

 
$
3.93

$4.01 - 4.50
 
475,000

 
$
4.13

 
4.78
 
475,000

 
$
4.13

$4.51 - 5.00
 
60,000

 
$
4.65

 
3.24
 
60,000

 
$
4.65

$5.01 and over
 
377,000

 
$
6.32

 
9.03
 
78,837

 
$
5.96

 
 
8,300,438

 
2.36

 
7.15
 
5,119,274

 
2.15


Other information pertaining to stock options for the Stock Plans for the nine months ended December 31, 2019 and 2018, as stated in the table below, is as follows:
 
 
December 31,
 
 
2019
 
2018
Total fair value of options vested
 
$
2,028

 
$
1,202

Total intrinsic value of options exercised (a)
 
$
10,364

 
$
192

(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, 2019 and 2018.
During the nine months ended December 31, 2019 and 2018, the Company granted options to purchase 1,738,750 and 1,349,925 shares of its common stock, respectively, to employees with weighted-average grant-date fair values of $4.34 and $1.64, respectively.
At December 31, 2019 and 2018, there was $3,547 and $2,194 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 2.16 and 2.01 years, respectively.
Valuation of Awards
For stock options granted under Digital Turbine’s Stock Plans, the Company typically uses the Black-Scholes option pricing model to estimate the fair value 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, 2019 are presented below.

 
December 31, 2019
Risk-free interest rate
 
1.67% to 2.25%
Expected life of the options
 
5.35 to 9.83 years
Expected volatility
 
65% to 66%
Expected dividend yield
 
—%
Expected forfeitures
 
27% to 29%

Expected volatility is based on a blend of implied and historical volatility of the Company's common stock over the most recent period commensurate with the estimated expected term 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 the Company’s Stock Plans for the three and nine months ended December 31, 2019, which includes both stock options and restricted stock, was $917 and $2,514, respectively. Total stock compensation expense for the Company’s Stock Plans for the three and nine months ended December 31, 2018, which includes both stock options and restricted stock, was $631 and $1,781, respectively. Please refer to Note 11. "Capital Stock Transactions" regarding restricted stock.
v3.19.3.a.u2
Property and Equipment
9 Months Ended
Dec. 31, 2019
Property, Plant and Equipment [Abstract]  
Property and Equipment
Property and Equipment
 
 
December 31, 2019
 
March 31, 2019
 
 
(Unaudited)
 
 
Computer-related equipment
 
$
9,691

 
$
7,077

Furniture and fixtures
 
414

 
223

Leasehold improvements
 
623

 
558

Property and equipment, gross
 
10,728

 
7,858

Accumulated depreciation
 
(5,612
)
 
(4,428
)
Property and equipment, net
 
$
5,116

 
$
3,430


Depreciation expense was $540 and $1,484 for the three and nine months ended December 31, 2019, respectively, and $374 and $1,139 for the three and nine months ended December 31, 2018, respectively. Depreciation expense for the three and nine months ended December 31, 2019 includes $140 and $462, respectively, related to internal-use assets included in general and administrative expense, and $400 and $1,022, 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 months ended December 31, 2018 includes $170 and $591, respectively, related to internal-use assets included in general and administrative expense, and $204 and $548, respectively, related to internally-developed software to be sold, leased, or otherwise marketed included in other direct costs of revenue.
v3.19.3.a.u2
Discontinued Operations - Reconciling Cash Flow Information (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Cash flows from operating activities        
Net income / (loss) from discontinued operations, net of taxes $ 65 $ (212) $ (171) $ (1,612)
Increase / (decrease) in liabilities:        
Net cash provided by / (used in) operating activities     20,010 (907)
Discontinued Operations        
Cash flows from operating activities        
Net income / (loss) from discontinued operations, net of taxes $ 65 $ (212) (171) (1,612)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation and amortization     19 247
Impairment of goodwill     0 309
Change in allowance for doubtful accounts     (47) (380)
Loss on disposal of fixed assets     104 0
Stock-based compensation     0 37
(Increase) / decrease in assets:        
Accounts receivable     405 5,164
Prepaid expenses and other current assets     0 95
Increase / (decrease) in liabilities:        
Accounts payable     (232) (4,675)
Accrued license fees and revenue share     (202) (1,991)
Accrued compensation     (56) (302)
Other current liabilities     35 (328)
Net cash provided by / (used in) operating activities     (145) (3,436)
Cash used in discontinued operations     $ (145) $ (3,436)
v3.19.3.a.u2
Net Income / (Loss) Per Share (Tables)
9 Months Ended
Dec. 31, 2019
Earnings Per Share [Abstract]  
Schedule of Net Income (Loss) Per Share of Common Stock
The following table sets forth the computation of net income / (loss) 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,
 
 
2019
 
2018
 
2019
 
2018
Income / (loss) from continuing operations, net of taxes
 
$
3,261

 
$
(1,136
)
 
$
253

 
$
2,460

Weighted-average common shares outstanding, basic
 
85,876

 
77,645

 
83,869

 
76,977

Weighted-average common shares outstanding, diluted
 
92,472

 
77,645

 
89,759

 
79,371

Basic and diluted net income / (loss) per common share
 
$
0.04

 
$
(0.01
)
 
$

 
$
0.03

Common stock equivalents included in net income per diluted share
 
6,596

 

 
5,890

 
2,394

Common stock equivalents excluded from net loss per diluted share because their effect would have been anti-dilutive
 

 
2,485

 

 

v3.19.3.a.u2
Summary of Significant Accounting Policies (Details) - segment
3 Months Ended 9 Months Ended 12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Mar. 31, 2019
Concentration Risk [Line Items]          
Number of operating segments     1    
Accounts Receivable | Customer A          
Concentration Risk [Line Items]          
Concentrations of credit risk     20.90%   25.70%
Sales | Customer A          
Concentration Risk [Line Items]          
Concentrations of credit risk 14.40%   17.70%    
Sales | Customer B          
Concentration Risk [Line Items]          
Concentrations of credit risk   28.80%   31.10%  
Sales | Carrier Partner A          
Concentration Risk [Line Items]          
Concentrations of credit risk 37.50% 43.70% 40.30% 47.60%  
Sales | Carrier Partner B          
Concentration Risk [Line Items]          
Concentrations of credit risk 29.80% 38.50% 30.90% 38.40%  
Sales | Carrier Partner C          
Concentration Risk [Line Items]          
Concentrations of credit risk 12.40%   10.00%    
License and Service | Minimum          
Concentration Risk [Line Items]          
License agreement, term 2 years   2 years    
License and Service | Maximum          
Concentration Risk [Line Items]          
License agreement, term 4 years   4 years    
v3.19.3.a.u2
Description of Stock Plans - Summary of Exercise Price (Details)
9 Months Ended
Dec. 31, 2019
$ / shares
shares
Employee Stock Ownership Plan E S O P Disclosures [Line Items]  
Options Outstanding, Number of Shares (in shares) | shares 8,300,438
Options Outstanding, Weighted Average Exercise Price (in dollars per share) $ 2.36
Options Outstanding, Weighted Average Remaining Life 7 years 1 month 25 days
Options Exercisable, Number of Shares (in shares) | shares 5,119,274
Options Exercisable, Weighted Average Exercise Price (in dollars per share) $ 2.15
$0.51 - 1.00  
Employee Stock Ownership Plan E S O P Disclosures [Line Items]  
Range of exercise price, lower limit (in dollars per share) 0.51
Range of exercise price, upper limit (in dollars per share) $ 1.00
Options Outstanding, Number of Shares (in shares) | shares 1,591,790
Options Outstanding, Weighted Average Exercise Price (in dollars per share) $ 0.73
Options Outstanding, Weighted Average Remaining Life 6 years 10 months 3 days
Options Exercisable, Number of Shares (in shares) | shares 828,032
Options Exercisable, Weighted Average Exercise Price (in dollars per share) $ 0.73
$1.01 - 1.50  
Employee Stock Ownership Plan E S O P Disclosures [Line Items]  
Range of exercise price, lower limit (in dollars per share) 1.01
Range of exercise price, upper limit (in dollars per share) $ 1.5
Options Outstanding, Number of Shares (in shares) | shares 1,863,050
Options Outstanding, Weighted Average Exercise Price (in dollars per share) $ 1.29
Options Outstanding, Weighted Average Remaining Life 6 years 7 months 7 days
Options Exercisable, Number of Shares (in shares) | shares 1,718,255
Options Exercisable, Weighted Average Exercise Price (in dollars per share) $ 1.30
$1.51 - 2.00  
Employee Stock Ownership Plan E S O P Disclosures [Line Items]  
Range of exercise price, lower limit (in dollars per share) 1.51
Range of exercise price, upper limit (in dollars per share) $ 2
Options Outstanding, Number of Shares (in shares) | shares 1,024,212
Options Outstanding, Weighted Average Exercise Price (in dollars per share) $ 1.67
Options Outstanding, Weighted Average Remaining Life 8 years 3 months 22 days
Options Exercisable, Number of Shares (in shares) | shares 492,253
Options Exercisable, Weighted Average Exercise Price (in dollars per share) $ 1.66
$2.01 - 2.50  
Employee Stock Ownership Plan E S O P Disclosures [Line Items]  
Range of exercise price, lower limit (in dollars per share) 2.01
Range of exercise price, upper limit (in dollars per share) $ 2.50
Options Outstanding, Number of Shares (in shares) | shares 560,778
Options Outstanding, Weighted Average Exercise Price (in dollars per share) $ 2.23
Options Outstanding, Weighted Average Remaining Life 8 years 3 months 18 days
Options Exercisable, Number of Shares (in shares) | shares 250,156
Options Exercisable, Weighted Average Exercise Price (in dollars per share) $ 2.21
$2.51 - 3.00  
Employee Stock Ownership Plan E S O P Disclosures [Line Items]  
Range of exercise price, lower limit (in dollars per share) 2.51
Range of exercise price, upper limit (in dollars per share) $ 3.00
Options Outstanding, Number of Shares (in shares) | shares 535,958
Options Outstanding, Weighted Average Exercise Price (in dollars per share) $ 2.59
Options Outstanding, Weighted Average Remaining Life 4 years 4 months 3 days
Options Exercisable, Number of Shares (in shares) | shares 535,958
Options Exercisable, Weighted Average Exercise Price (in dollars per share) $ 2.59
$3.51 - 4.00  
Employee Stock Ownership Plan E S O P Disclosures [Line Items]  
Range of exercise price, lower limit (in dollars per share) 3.51
Range of exercise price, upper limit (in dollars per share) $ 4.00
Options Outstanding, Number of Shares (in shares) | shares 1,812,650
Options Outstanding, Weighted Average Exercise Price (in dollars per share) $ 3.89
Options Outstanding, Weighted Average Remaining Life 8 years 1 month 25 days
Options Exercisable, Number of Shares (in shares) | shares 680,783
Options Exercisable, Weighted Average Exercise Price (in dollars per share) $ 3.93
$4.01 - 4.50  
Employee Stock Ownership Plan E S O P Disclosures [Line Items]  
Range of exercise price, lower limit (in dollars per share) 4.01
Range of exercise price, upper limit (in dollars per share) $ 4.50
Options Outstanding, Number of Shares (in shares) | shares 475,000
Options Outstanding, Weighted Average Exercise Price (in dollars per share) $ 4.13
Options Outstanding, Weighted Average Remaining Life 4 years 9 months 10 days
Options Exercisable, Number of Shares (in shares) | shares 475,000
Options Exercisable, Weighted Average Exercise Price (in dollars per share) $ 4.13
$4.51 - 5.00  
Employee Stock Ownership Plan E S O P Disclosures [Line Items]  
Range of exercise price, lower limit (in dollars per share) 4.51
Range of exercise price, upper limit (in dollars per share) $ 5.00
Options Outstanding, Number of Shares (in shares) | shares 60,000
Options Outstanding, Weighted Average Exercise Price (in dollars per share) $ 4.65
Options Outstanding, Weighted Average Remaining Life 3 years 2 months 25 days
Options Exercisable, Number of Shares (in shares) | shares 60,000
Options Exercisable, Weighted Average Exercise Price (in dollars per share) $ 4.65
$5.01 and over  
Employee Stock Ownership Plan E S O P Disclosures [Line Items]  
Exercise price (in dollars per share) $ 5.01
Options Outstanding, Number of Shares (in shares) | shares 377,000
Options Outstanding, Weighted Average Exercise Price (in dollars per share) $ 6.32
Options Outstanding, Weighted Average Remaining Life 9 years 10 days
Options Exercisable, Number of Shares (in shares) | shares 78,837
Options Exercisable, Weighted Average Exercise Price (in dollars per share) $ 5.96
v3.19.3.a.u2
Fair Value Measurements - Reconciliation of Financial Liabilities Measured at Fair Value (Details) - Warrant liability
$ in Thousands
9 Months Ended
Dec. 31, 2019
USD ($)
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]  
Beginning balance $ 8,013
Ending balance 6,300
Level 3  
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]  
Beginning balance 8,013
Ending balance 6,300
Level 3 | Warrant liability  
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]  
Beginning balance 8,013
Change in fair value of convertible note embedded derivative liability 10,601
De-recognition on exercises (12,314)
Ending balance $ 6,300
v3.19.3.a.u2
Capital Stock Transactions - Schedule of Stockholders' Equity Note, Warrants or Rights (Details) - Warrant liability
9 Months Ended
Dec. 31, 2019
$ / shares
shares
Number of Warrants Outstanding  
Beginning (in shares) | shares 3,639,100
Exercised (in shares) | shares (2,524,500)
Ending (in shares) | shares 1,114,600
Weighted-Average Exercise Price  
Beginning (in dollars per share) | $ / shares $ 1.37
Exercised (in dollars per share) | $ / shares 1.36
Ending (in dollars per share) | $ / shares $ 1.38
v3.19.3.a.u2
Fair Value Measurements - Narrative (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 9 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Sep. 30, 2019
Mar. 31, 2019
Sep. 30, 2018
Mar. 31, 2018
Sep. 28, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]                  
(Loss) gain from change in fair value of convertible note embedded derivative liability $ 0 $ (1,476) $ 0 $ 1,096          
Stock price (in dollars per share) $ 7.13 $ 1.83 $ 7.13 $ 1.83 $ 6.45 $ 3.78 $ 1.24 $ 2.01  
Gain (loss) from change in fair value of warrant liability $ (870) $ (1,651) $ (10,601) $ 845          
Convertible notes                  
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]                  
Original discount                 $ 4,916
v3.19.3.a.u2
Property and Equipment (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Mar. 31, 2019
Property, Plant and Equipment [Abstract]    
Computer-related equipment $ 9,691 $ 7,077
Furniture and fixtures 414 223
Leasehold improvements 623 558
Property and equipment, gross 10,728 7,858
Accumulated depreciation (5,612) (4,428)
Property and equipment, net $ 5,116 $ 3,430
v3.19.3.a.u2
Debt - Convertible Notes (Details) - USD ($)
3 Months Ended 9 Months Ended 12 Months Ended
Sep. 28, 2016
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Mar. 31, 2019
Mar. 31, 2018
Dec. 31, 2016
Debt Instrument [Line Items]                
Repayments of debt $ 11,000,000              
Loss on extinguishment of debt   $ 0 $ 10,000 $ 0 $ 25,000 $ 431,000    
Convertible notes                
Debt Instrument [Line Items]                
Debt face amount $ 16,000,000              
Interest rate 8.75%              
Gross amount $ 11,084,000              
Original discount 4,916,000              
Issuance costs $ 1,700,000             $ 212,000
Purchase price of principal 92.75%              
Warrants issued (in shares) 250,000 4,105,600   4,105,600        
Right to receive cash 2.50%              
Convertible debt conversion price (in dollars per share) $ 1.364         $ 1.364 $ 1.364  
Warrant to purchase (in shares)   256,600.00   256,600.00        
Warrant exercise price (in dollars per share) $ 1.364              
Proceeds from debt $ 14,316,000              
Notes converted           $ 5,700,000 $ 10,300,000  
Write off of debt discount             2,591,000  
Write off of deferred debt issuance cost           1,360,000 1,019,000  
Extinguishment of debt           $ 4,340,000 $ 6,690,000  
Conversion of stock, shares issued           4,446,265 8,624,445  
Repayments of debt             $ 247,000  
Adjustments to additional paid in capital           $ 10,582,000 14,238,000  
Loss on extinguishment of debt             $ 1,785,000  
Convertible notes | Convertible note embedded derivative liability                
Debt Instrument [Line Items]                
Warrant liability 3,693,000              
Convertible notes | Warrant liability                
Debt Instrument [Line Items]                
Warrant liability $ 1,223,000              
v3.19.3.a.u2
Geographic Information - Schedule of Net Revenue by Geography (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Entity Wide Revenue Major Customer [Line Items]        
Net revenues $ 36,016 $ 30,411 $ 99,364 $ 76,377
United States and Canada        
Entity Wide Revenue Major Customer [Line Items]        
Net revenues 22,486 20,952 66,057 53,871
Europe, Middle East, and Africa        
Entity Wide Revenue Major Customer [Line Items]        
Net revenues 9,205 6,160 24,129 13,244
Asia Pacific and China        
Entity Wide Revenue Major Customer [Line Items]        
Net revenues 3,731 2,312 8,137 6,709
Mexico, Central America, and South America        
Entity Wide Revenue Major Customer [Line Items]        
Net revenues $ 594 $ 987 $ 1,041 $ 2,553
v3.19.3.a.u2
Consolidated Balance Sheets (Parenthetical) - USD ($)
Dec. 31, 2019
Mar. 31, 2019
Statement of Financial Position [Abstract]    
Accounts receivable, allowances $ 1,101,000 $ 895,000
Series A convertible preferred stock, par value (in dollars per share) $ 0.0001 $ 0.0001
Series A convertible preferred stock, shares authorized 2,000,000 2,000,000
Series A convertible preferred stock, shares issued 100,000 100,000
Series A convertible preferred stock, shares outstanding 100,000 100,000
Series A convertible preferred stock, liquidation preference $ 1,000,000 $ 1,000,000
Common stock, par value (in dollars per share) $ 0.0001 $ 0.0001
Common stock, shares authorized 200,000,000 200,000,000
Common stock, shares issued 87,057,421 82,354,940
Common stock, shares outstanding 86,322,965 81,620,485
Treasury stock (in shares) 754,599 754,599
v3.19.3.a.u2
Description of Business
9 Months Ended
Dec. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Description of Business
Description of Business
Digital Turbine, Inc., through its subsidiaries, innovates at the convergence of media and mobile communications, delivering an end-to-end platform solution for mobile operators, application developers, device original equipment manufacturers ("OEMs"), and other third parties to enable them to effectively monetize mobile content and generate higher-value user acquisition. Through December 31, 2019, Digital Turbine has delivered over 3 billion application pre-loads on over 369 million devices across thirty-five Operator and OEM ("O&O") partnerships. The Company operates this business as one reportable segment – Advertising.
The Company's Advertising segment operates the O&O business, an advertiser solution for unique and exclusive carrier and OEM inventory, which is comprised of services including:
Ignite™ ("Ignite"), a software platform with targeted media delivery and management capabilities, and
Other recurring and life-cycle products, features, and professional services delivered on the Ignite platform.
Prior to the sale of the Advertiser and Publisher ("A&P") Assets described below under Note 4. "Discontinued Operations," the Advertising reporting segment also included the A&P Assets as an operating segment within Advertising.
With global headquarters in Austin, Texas and offices in Durham, North Carolina; San Francisco, California; Singapore; and Tel Aviv, Israel, Digital Turbine’s solutions are available worldwide.
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”), and Digital Turbine Media, Inc. (“DT Media”), which we acquired on March 6, 2015. We refer to all of the Company's subsidiaries collectively as "wholly-owned subsidiaries."
v3.19.3.a.u2
Discontinued Operations (Tables)
9 Months Ended
Dec. 31, 2019
Discontinued Operations and Disposal Groups [Abstract]  
Financial Results of Discontinued Operations
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,
 
 
2019
 
2018
 
2019
 
2018
Net revenues
 
$

 
$
3

 
$

 
$
3,880

Total cost of revenues
 
(102
)
 

 
(102
)
 
3,070

Gross profit
 
102

 
3

 
102

 
810

Product development
 

 
37

 
62

 
703

Sales and marketing
 

 
7

 

 
350

General and administrative
 
37

 
160

 
122

 
1,212

Income / (loss) from operations
 
65

 
(201
)
 
(82
)
 
(1,455
)
Interest and other income / (expense), net
 

 
(11
)
 
(89
)
 
(157
)
Income / (loss) from discontinued operations before income taxes
 
65

 
(212
)
 
(171
)
 
(1,612
)
Income / (loss) from discontinued operations, net of taxes
 
65

 
(212
)
 
(171
)
 
(1,612
)
Comprehensive income / (loss)
 
$
65

 
$
(212
)
 
$
(171
)
 
$
(1,612
)
Basic and diluted net income / (loss) per common share
 
$

 
$

 
$

 
$
(0.02
)
Weighted-average common shares outstanding, basic
 
85,876

 
77,645

 
83,869

 
76,977

Weighted-average common shares outstanding, diluted
 
92,472

 
77,645

 
89,759

 
79,371

Details on assets and liabilities classified as held-for-disposal in the accompanying consolidated balance sheets are presented in the following table:
 
 
December 31, 2019
 
March 31, 2019
 
 
(Unaudited)
 
 
Assets held for disposal
 
 
 
 
Accounts receivable, net of allowances of $1,542 and $1,589, respectively
 
$
1,525

 
$
1,883

Property and equipment, net
 
2

 
143

Total assets held for disposal
 
$
1,527

 
$
2,026

 
 
 
 
 
Liabilities held for disposal
 
 
 
 
Accounts payable
 
$
2,926

 
$
3,158

Accrued license fees and revenue share
 
335

 
537

Accrued compensation
 
170

 
226

Other current liabilities
 

 
3

Total liabilities held for disposal
 
$
3,431

 
$
3,924


Assets and liabilities held for disposal as of December 31, 2019 and March 31, 2019 are classified as current since we expect the dispositions to be completed within one year.

The following table provides reconciling cash flow information for our discontinued operations:
 
 
Nine months ended December 31,
 
 
2019
 
2018
 
 
(Unaudited)
 
(Unaudited)
Cash flows from operating activities
 
 
 
 
Net loss from discontinued operations, net of taxes
 
$
(171
)
 
$
(1,612
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
 
19

 
247

Impairment of goodwill
 

 
309

Change in allowance for doubtful accounts
 
(47
)
 
(380
)
Loss on disposal of fixed assets
 
104

 

Stock-based compensation
 

 
37

(Increase) / decrease in assets:
 
 
 
 
Accounts receivable
 
405

 
5,164

Prepaid expenses and other current assets
 

 
95

Increase / (decrease) in liabilities:
 
 
 
 
Accounts payable
 
(232
)
 
(4,675
)
Accrued license fees and revenue share
 
(202
)
 
(1,991
)
Accrued compensation
 
(56
)
 
(302
)
Other current liabilities
 
35

 
(328
)
Cash used in operating activities
 
(145
)
 
(3,436
)
 
 
 
 
 
Cash used in discontinued operations
 
$
(145
)
 
$
(3,436
)
v3.19.3.a.u2
Commitments and Contingencies
9 Months Ended
Dec. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies

Potential Financial Exposure Related to Discontinued Operations

Please see information regarding possible exposure related to the settlement of certain assets and liabilities related to the disposition of the Pay business in Note 4. "Discontinued Operations."
v3.19.3.a.u2
Fair Value Measurements (Tables)
9 Months Ended
Dec. 31, 2019
Fair Value Disclosures [Abstract]  
Schedule of Financial Assets and Liabilities Measured at Fair Value
The Company’s financial liabilities as of the issuance date of the convertible notes on the initial measurement date of September 28, 2016 are presented below at fair value and were classified within the fair value hierarchy as follows:
 
 
Level 1
 
Level 2
 
Level 3
 
Balance at Inception
Financial Liabilities
 
 
 
 
 
 
 
 
Convertible note embedded derivative liability
 
$

 
$

 
$
3,693

 
$
3,693

Warrant liability
 

 

 
1,223

 
1,223

Total
 
$

 
$

 
$
4,916

 
$
4,916

as of December 31, 2019 and March 31, 2019, the Company’s financial liability presented below at fair value was classified within the fair value hierarchy as follows:
 
 
Level 1
 
Level 2
 
Level 3
 
Balance as of December 31, 2019
 
 
 
 
 
 
 
 
(Unaudited)
Financial Liabilities
 
 
 
 
 
 
 
 
Warrant liability
 
$

 
$

 
$
6,300

 
$
6,300

Total
 
$

 
$

 
$
6,300

 
$
6,300

 
 
Level 1
 
Level 2
 
Level 3
 
Balance as of March 31, 2019
Financial Liabilities
 
 
 
 
 
 
 
 
Warrant liability
 
$

 
$

 
$
8,013

 
$
8,013

Total
 
$

 
$

 
$
8,013

 
$
8,013

Reconciliation of Financial Liabilities Measured at Fair Value
The following table provides a reconciliation of the beginning and ending balances for the warrant liability measured at fair value using significant unobservable inputs (Level 3):
 
 
Level 3
Balance at March 31, 2019
 
$
8,013

Change in fair value of warrant liability
 
10,601

De-recognition on exercises
 
(12,314
)
Balance at December 31, 2019
 
$
6,300

Schedule of Market-based Assumptions
The market-based assumptions and estimates used in valuing the warrant liability include the following:
 
December 31, 2019
Stock price volatility
60
%
Stock price (per share)
$7.13
Expected term
0.73 years

Risk-free rate (1)
1.59
%
(1) The Black-Scholes model assumes the continuously compounded equivalent (CCE) interest rate of 1.59% based on the 1-year U.S. Treasury securities as of the valuation date.
The assumptions utilized in this model for options granted during the nine months ended December 31, 2019 are presented below.

 
December 31, 2019
Risk-free interest rate
 
1.67% to 2.25%
Expected life of the options
 
5.35 to 9.83 years
Expected volatility
 
65% to 66%
Expected dividend yield
 
—%
Expected forfeitures
 
27% to 29%
v3.19.3.a.u2
Accounts Receivable (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Mar. 31, 2019
Receivables [Abstract]          
Billed $ 13,314   $ 13,314   $ 11,833
Unbilled 14,481   14,481   11,769
Allowance for doubtful accounts (1,101)   (1,101)   (895)
Accounts receivable, net 26,694   26,694   $ 22,707
Bad debt expense $ 56 $ 59 $ 184 $ 229  
v3.19.3.a.u2
Leases - Schedule, by fiscal year, of maturities of lease liabilities (Details)
$ in Thousands
Dec. 31, 2019
USD ($)
Leases [Abstract]  
Remainder of fiscal year 2020 $ 169
Fiscal year 2021 688
Fiscal year 2022 705
Fiscal year 2022 723
Fiscal year 2024 520
Thereafter 203
Total undiscounted cash flows 3,008
(Less imputed interest) (368)
Present value of lease liabilities $ 2,640
v3.19.3.a.u2
Fair Value Measurements - Schedule of Financial Assets and Liabilities Measured at Fair Value (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Mar. 31, 2019
Sep. 28, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Financial liabilities $ 6,300 $ 8,013 $ 4,916
Level 1      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Financial liabilities 0 0 0
Level 2      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Financial liabilities 0 0 0
Level 3      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Financial liabilities 6,300 8,013 4,916
Convertible note embedded derivative liability      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Warrant liability     3,693
Convertible note embedded derivative liability | Level 1      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Warrant liability     0
Convertible note embedded derivative liability | Level 2      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Warrant liability     0
Convertible note embedded derivative liability | Level 3      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Warrant liability     3,693
Warrant liability      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Warrant liability 6,300 8,013 1,223
Warrant liability | Level 1      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Warrant liability 0 0 0
Warrant liability | Level 2      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Warrant liability 0 0 0
Warrant liability | Level 3      
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]      
Warrant liability $ 6,300 $ 8,013 $ 1,223
v3.19.3.a.u2
Subsequent Event (Details) - Mobile Posse - USD ($)
$ in Thousands
Mar. 16, 2020
Feb. 06, 2020
Subsequent event    
Loss Contingencies [Line Items]    
Total consideration   $ 66,000
Consideration, cash   41,500
Earn-out liability   $ 24,500
Forecast    
Loss Contingencies [Line Items]    
Termination fee $ 5,000  
v3.19.3.a.u2
Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2019
Mar. 31, 2019
Current assets    
Cash $ 33,714 $ 10,894
Restricted cash 165 165
Accounts receivable, net of allowances of $1,101 and $895, respectively 26,694 22,707
Prepaid expenses and other current assets 2,141 1,331
Current assets held for disposal 1,527 2,026
Total current assets 64,241 37,123
Property and equipment, net 5,116 3,430
Right-of-use assets 2,029  
Deferred tax assets 0 40
Goodwill 42,268 42,268
TOTAL ASSETS 113,654 82,861
Current liabilities    
Accounts payable 20,820 14,912
Accrued license fees and revenue share 16,264 16,205
Accrued compensation 3,296 2,441
Warrant liability 6,300 0
Other current liabilities 4,285 826
Current liabilities held for disposal 3,431 3,924
Total current liabilities 54,396 38,308
Warrant liability 0 8,013
Other non-current liabilities 2,007 182
Total liabilities 56,403 46,503
Stockholders' equity    
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
Common stock - $0.0001 par value: 200,000,000 shares authorized; 87,057,421 issued and 86,322,965 outstanding at December 31, 2019; 82,354,940 issued and 81,620,485 outstanding at March 31, 2019 10 10
Additional paid-in capital 353,968 332,793
Treasury stock (754,599 shares at December 31, 2019 and March 31, 2019) (71) (71)
Accumulated other comprehensive loss (720) (356)
Accumulated deficit (296,036) (296,118)
Total stockholders' equity 57,251 36,358
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 113,654 $ 82,861
v3.19.3.a.u2
Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)
$ in Thousands
Total
Common Stock
Preferred Stock
Treasury Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Income/(Loss)
Accumulated Deficit
Beginning balance (in shares) at Mar. 31, 2018   76,108,823 100,000 754,599      
Beginning balance at Mar. 31, 2018 $ 27,672 $ 10 $ 100 $ (71) $ 318,066 $ (325) $ (290,108)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net loss 484           484
Stock-based compensation 500       500    
Stock-based compensation for services rendered 85       85    
Options exercised (in shares)   50,000          
Options exercised 39       39    
Ending balance (in shares) at Jun. 30, 2018   76,158,823 100,000 754,599      
Ending balance at Jun. 30, 2018 28,780 $ 10 $ 100 $ (71) 318,690 (325) (289,624)
Beginning balance (in shares) at Mar. 31, 2018   76,108,823 100,000 754,599      
Beginning balance at Mar. 31, 2018 27,672 $ 10 $ 100 $ (71) 318,066 (325) (290,108)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net loss 848            
Foreign currency translation (5)            
Ending balance (in shares) at Dec. 31, 2018   77,471,913 100,000 754,599      
Ending balance at Dec. 31, 2018 31,753 $ 10 $ 100 $ (71) 321,297 (323) (289,260)
Beginning balance (in shares) at Jun. 30, 2018   76,158,823 100,000 754,599      
Beginning balance at Jun. 30, 2018 28,780 $ 10 $ 100 $ (71) 318,690 (325) (289,624)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net loss 1,712           1,712
Foreign currency translation 2         2  
Conversion of convertible notes to equity (in shares)   670,878          
Conversion of convertible notes to equity 948       948    
Stock-based compensation (in shares)   306,656          
Stock-based compensation 602       602    
Options exercised (in shares)   111,200          
Options exercised 121       121    
Ending balance (in shares) at Sep. 30, 2018   77,247,557 100,000 754,599      
Ending balance at Sep. 30, 2018 32,165 $ 10 $ 100 $ (71) 320,361 (323) (287,912)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net loss (1,348)           (1,348)
Foreign currency translation (5)            
Conversion of convertible notes to equity (in shares)   168,773          
Conversion of convertible notes to equity 241       241    
Stock-based compensation 632       632    
Options exercised (in shares)   55,583          
Options exercised 63       63    
Ending balance (in shares) at Dec. 31, 2018   77,471,913 100,000 754,599      
Ending balance at Dec. 31, 2018 31,753 $ 10 $ 100 $ (71) 321,297 (323) (289,260)
Beginning balance (in shares) at Mar. 31, 2019   81,620,485 100,000 754,599      
Beginning balance at Mar. 31, 2019 36,358 $ 10 $ 100 $ (71) 332,793 (356) (296,118)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net loss (1,819)           (1,819)
Foreign currency translation 98         98  
Settlement of warrant derivative liability 715       715    
Stock-based compensation (in shares)   38,759          
Stock-based compensation 560       560    
Stock-based compensation for services rendered 122       122    
Options exercised (in shares)   616,208          
Options exercised 910       910    
Warrant exercised (in shares)   212,250          
Warrants exercised 289       289    
Ending balance (in shares) at Jun. 30, 2019   82,487,702 100,000 754,599      
Ending balance at Jun. 30, 2019 37,233 $ 10 $ 100 $ (71) 335,389 (258) (297,937)
Beginning balance (in shares) at Mar. 31, 2019   81,620,485 100,000 754,599      
Beginning balance at Mar. 31, 2019 36,358 $ 10 $ 100 $ (71) 332,793 (356) (296,118)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net loss 82            
Foreign currency translation (364)            
Ending balance (in shares) at Dec. 31, 2019   86,322,965 100,000 754,599      
Ending balance at Dec. 31, 2019 57,251 $ 10 $ 100 $ (71) 353,968 (720) (296,036)
Beginning balance (in shares) at Jun. 30, 2019   82,487,702 100,000 754,599      
Beginning balance at Jun. 30, 2019 37,233 $ 10 $ 100 $ (71) 335,389 (258) (297,937)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net loss (1,425)           (1,425)
Foreign currency translation (418)         (418)  
Settlement of warrant derivative liability 8,648       8,648    
Stock-based compensation (in shares)   9,690          
Stock-based compensation 740       740    
Stock-based compensation for services rendered (in shares)   75,494          
Stock-based compensation for services rendered 175       175    
Options exercised (in shares)   1,006,792          
Options exercised 1,891       1,891    
Warrant exercised (in shares)   1,667,293          
Warrants exercised 1,723       1,723    
Ending balance (in shares) at Sep. 30, 2019   85,246,971 100,000 754,599      
Ending balance at Sep. 30, 2019 48,567 $ 10 $ 100 $ (71) 348,566 (676) (299,362)
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Net loss 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 (in shares)   546,876          
Options exercised 927       927    
Warrant exercised (in shares)   529,118          
Warrants exercised 613       613    
Ending balance (in shares) at Dec. 31, 2019   86,322,965 100,000 754,599      
Ending balance at Dec. 31, 2019 $ 57,251 $ 10 $ 100 $ (71) $ 353,968 $ (720) $ (296,036)
v3.19.3.a.u2
Description of Stock Plans (Tables)
9 Months Ended
Dec. 31, 2019
Share-based Payment Arrangement [Abstract]  
Summary of Stock Option Activity
The following table summarizes stock option activity for the Stock 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, 2019
 
9,128,885

 
$
1.80

 
7.31
 
$
16,347

Granted
 
1,738,750

 
4.34

 
 
 
 
Forfeited / Cancelled
 
(397,321
)
 
1.78

 
 
 
 
Exercised
 
(2,169,876
)
 
1.72

 
 
 
 
Options Outstanding, December 31, 2019
 
8,300,438

 
2.36

 
7.15
 
39,656

Vested and expected to vest (net of estimated forfeitures) at December 31, 2019 (a)
 
7,413,546

 
2.29

 
6.97
 
35,900

Exercisable, December 31, 2019
 
5,119,274

 
$
2.15

 
6.28
 
$
25,517

(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, 2019 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, 2019. The intrinsic value changes based on changes in the price of the Company's common stock.
Summary of Exercise Price
Information about options outstanding and exercisable at December 31, 2019 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
$0.51 - 1.00
 
1,591,790

 
$
0.73

 
6.84
 
828,032

 
$
0.73

$1.01 - 1.50
 
1,863,050

 
$
1.29

 
6.60
 
1,718,255

 
$
1.30

$1.51 - 2.00
 
1,024,212

 
$
1.67

 
8.31
 
492,253

 
$
1.66

$2.01 - 2.50
 
560,778

 
$
2.23

 
8.30
 
250,156

 
$
2.21

$2.51 - 3.00
 
535,958

 
$
2.59

 
4.34
 
535,958

 
$
2.59

$3.51 - 4.00
 
1,812,650

 
$
3.89

 
8.15
 
680,783

 
$
3.93

$4.01 - 4.50
 
475,000

 
$
4.13

 
4.78
 
475,000

 
$
4.13

$4.51 - 5.00
 
60,000

 
$
4.65

 
3.24
 
60,000

 
$
4.65

$5.01 and over
 
377,000

 
$
6.32

 
9.03
 
78,837

 
$
5.96

 
 
8,300,438

 
2.36

 
7.15
 
5,119,274

 
2.15

Schedule of Options Vested and Intrinsic Value of Options Exercised
Other information pertaining to stock options for the Stock Plans for the nine months ended December 31, 2019 and 2018, as stated in the table below, is as follows:
 
 
December 31,
 
 
2019
 
2018
Total fair value of options vested
 
$
2,028

 
$
1,202

Total intrinsic value of options exercised (a)
 
$
10,364

 
$
192

(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, 2019 and 2018.
Schedule of Market-based Assumptions
The market-based assumptions and estimates used in valuing the warrant liability include the following:
 
December 31, 2019
Stock price volatility
60
%
Stock price (per share)
$7.13
Expected term
0.73 years

Risk-free rate (1)
1.59
%
(1) The Black-Scholes model assumes the continuously compounded equivalent (CCE) interest rate of 1.59% based on the 1-year U.S. Treasury securities as of the valuation date.
The assumptions utilized in this model for options granted during the nine months ended December 31, 2019 are presented below.

 
December 31, 2019
Risk-free interest rate
 
1.67% to 2.25%
Expected life of the options
 
5.35 to 9.83 years
Expected volatility
 
65% to 66%
Expected dividend yield
 
—%
Expected forfeitures
 
27% to 29%
v3.19.3.a.u2
Accounts Receivable (Tables)
9 Months Ended
Dec. 31, 2019
Receivables [Abstract]  
Schedule of Accounts Receivable
 
 
December 31, 2019
 
March 31, 2019
 
 
(Unaudited)
 
 
Billed
 
$
13,314

 
$
11,833

Unbilled
 
14,481

 
11,769

Allowance for doubtful accounts
 
(1,101
)
 
(895
)
Accounts receivable, net
 
$
26,694

 
$
22,707

v3.19.3.a.u2
Geographic Information
9 Months Ended
Dec. 31, 2019
Segment Reporting [Abstract]  
Geographic Information
Geographic Information
The following table sets forth geographic information on our net revenues for the three and nine months ended December 31, 2019 and 2018. Net revenues by geography are based on the billing addresses of our customers.
 
 
Three months ended December 31,
 
 
2019
 
2018
 
 
(Unaudited)
Net revenues
 
 
 
 
     United States and Canada
 
$
22,486

 
$
20,952

     Europe, Middle East, and Africa
 
9,205

 
6,160

     Asia Pacific and China
 
3,731

 
2,312

     Mexico, Central America, and South America
 
594

 
987

Consolidated net revenues
 
$
36,016

 
$
30,411

 
 
 
 
 
 
 
Nine months ended December 31,
 
 
2019
 
2018
 
 
(Unaudited)
Net revenues
 
 
 
 
     United States and Canada
 
$
66,057

 
$
53,871

     Europe, Middle East, and Africa
 
24,129

 
13,244

     Asia Pacific and China
 
8,137

 
6,709

     Mexico, Central America, and South America
 
1,041

 
2,553

Consolidated net revenues
 
$
99,364

 
$
76,377

v3.19.3.a.u2
Capital Stock Transactions
9 Months Ended
Dec. 31, 2019
Equity [Abstract]  
Capital Stock Transactions
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, 2019, the Company issued 2,169,876 shares of common stock for the exercise of employee options.
The following table provides activity for warrants issued and outstanding during the nine months ended December 31, 2019:
 
 
Number of Warrants Outstanding
 
Weighted-Average Exercise Price
Outstanding as of March 31, 2019
 
3,639,100

 
$
1.37

Exercised
 
(2,524,500
)
 
1.36

Outstanding as of December 31, 2019
 
1,114,600

 
$
1.38


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 value of the Company’s common stock on the date of the grant. Compensation expense for restricted stock awards with a service and time condition is recognized on a straight-line basis over the requisite service period.

In July 2019, the Company issued 75,494 restricted shares to its Board of Directors for their next annual service period. The shares vest quarterly over one year. The fair value of the shares on the date of issuance was $421.
With respect to time condition RSAs, the Company expensed $105 and $318 during the three and nine months ended December 31, 2019, respectively, and $123 and $365 during the three and nine months ended December 31, 2018, respectively.
The following is a summary of restricted stock awards and activities for all vesting conditions for the nine months ended December 31, 2019:
 
 
Number of Shares
 
Weighted-Average Grant Date Fair Value
Unvested restricted stock outstanding as of March 31, 2019
 
153,328

 
$
1.39

Granted
 
75,494

 
5.58

Vested
 
(172,202
)
 
1.85

Unvested restricted stock outstanding as of December 31, 2019
 
56,620

 
$
5.58


All restricted shares, vested and unvested, cancelable and not cancelled, have been included in the outstanding shares as of December 31, 2019.
At December 31, 2019, there was $246 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.
v3.19.3.a.u2
Leases
9 Months Ended
Dec. 31, 2019
Leases [Abstract]  
Leases
Leases
The Company has entered into various non-cancelable operating lease agreements for certain offices. These leases currently have lease periods expiring between fiscal years 2024 and 2025. The lease agreements may include one 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 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 are detailed below.
Schedule, by fiscal year, of maturities of lease liabilities as of:
 
 
December 31, 2019
 
 
(Unaudited)
Remainder of fiscal year 2020
 
$
169

Fiscal year 2021
 
688

Fiscal year 2022
 
705

Fiscal year 2023
 
723

Fiscal year 2024
 
520

Thereafter
 
203

Total undiscounted cash flows
 
3,008

(Less imputed interest)
 
(368
)
Present value of lease liabilities
 
$
2,640



The current portion of our lease liabilities, payable within the next 12 months, is included in other current liabilities and the long-term portion of our lease liabilities is included in other non-current liabilities on our Consolidated Balance Sheets.

Associated with this financial liability, the Company has recorded a right-of-use asset of $2,029, which is calculated using the present value of lease liabilities less any lease incentives received from our landlords and any deferred rent liability balance as of the date of implementation. The discount rate used to calculate the imputed interest above is 6.00% and the weighted-average remaining lease term is 4.31 years.
v3.19.3.a.u2
Capital Stock Transactions (Tables)
9 Months Ended
Dec. 31, 2019
Equity [Abstract]  
Schedule of Warrants Issued and Outstanding
The following table provides activity for warrants issued and outstanding during the nine months ended December 31, 2019:
 
 
Number of Warrants Outstanding
 
Weighted-Average Exercise Price
Outstanding as of March 31, 2019
 
3,639,100

 
$
1.37

Exercised
 
(2,524,500
)
 
1.36

Outstanding as of December 31, 2019
 
1,114,600

 
$
1.38

Summary of Restricted Stock Awards and Activities
The following is a summary of restricted stock awards and activities for all vesting conditions for the nine months ended December 31, 2019:
 
 
Number of Shares
 
Weighted-Average Grant Date Fair Value
Unvested restricted stock outstanding as of March 31, 2019
 
153,328

 
$
1.39

Granted
 
75,494

 
5.58

Vested
 
(172,202
)
 
1.85

Unvested restricted stock outstanding as of December 31, 2019
 
56,620

 
$
5.58

v3.19.3.a.u2
Liquidity (Details) - USD ($)
Dec. 31, 2019
May 22, 2019
Mar. 31, 2019
Dec. 31, 2018
Mar. 31, 2018
May 23, 2017
Debt Instrument [Line Items]            
Cash $ 33,879,000   $ 11,059,000 $ 10,531,000 $ 13,051,000  
Credit Agreement | Western Alliance Bank            
Debt Instrument [Line Items]            
Credit agreement, total facility amount   $ 20,000,000       $ 5,000,000
v3.19.3.a.u2
Discontinued Operations - Assets and Liabilities Held for Disposal (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Mar. 31, 2019
Assets held for disposal    
Allowance for doubtful accounts $ 1,542 $ 1,589
Discontinued Operations    
Assets held for disposal    
Accounts receivable, net of allowances of $1,542 and $1,589, respectively 1,525 1,883
Property and equipment, net 2 143
Total assets held for disposal 1,527 2,026
Liabilities held for disposal    
Accounts payable 2,926 3,158
Accrued license fees and revenue share 335 537
Accrued compensation 170 226
Other current liabilities 0 3
Total liabilities held for disposal $ 3,431 $ 3,924
v3.19.3.a.u2
Capital Stock Transactions - Summary of Non-Vested Restricted Stock Awards and Activities (Details) - Non Vested Restricted Stock
9 Months Ended
Dec. 31, 2019
$ / shares
shares
Number of Shares  
Non-vested restricted stock number of shares beginning balance | shares 153,328
Granted (in shares) | shares 75,494
Vested (in shares) | shares (172,202)
Non-vested restricted stock number of shares ending balance | shares 56,620
Weighted Average Grant Date Fair Value ($ per share)  
Non-vested restricted stock weighted average grant date fair value beginning balance (in dollars per share) | $ / shares $ 1.39
Granted (in dollars per share) | $ / shares 5.58
Vested (in dollars per share) | $ / shares 1.85
Non-vested restricted stock weighted average grant date fair value ending balance (in dollars per share) | $ / shares $ 5.58
v3.19.3.a.u2
Description of Stock Plans - Schedule of Options Vested and Intrinsic Value of Options Exercised (Details) - USD ($)
$ in Thousands
9 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Share-based Payment Arrangement [Abstract]    
Total fair value of options vested $ 2,028 $ 1,202
Total intrinsic value of options exercised $ 10,364 $ 192
v3.19.3.a.u2
Fair Value Measurements - Schedule of Market-based Assumptions (Details)
9 Months Ended
Dec. 31, 2019
$ / shares
Sep. 30, 2019
$ / shares
Mar. 31, 2019
$ / shares
Dec. 31, 2018
$ / shares
Sep. 30, 2018
$ / shares
Mar. 31, 2018
$ / shares
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]            
Stock price (in dollars per share) $ 7.13 $ 6.45 $ 3.78 $ 1.83 $ 1.24 $ 2.01
CCE interest rate 1.59%          
Warrant liability            
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]            
Stock price (in dollars per share) $ 7.13          
Stock price volatility | Warrant liability            
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]            
Embedded derivative liability, measurement input 0.60          
Expected term | Warrant liability            
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]            
Expected term 8 months 22 days          
Risk-free interest rate | Warrant liability            
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis Valuation Techniques [Line Items]            
Embedded derivative liability, measurement input 0.0159