Digital Turbine, Inc. (APPS)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated financial statements and the notes appearing in Item 8. Financial Statements and Supplementary Data. This section of our Annual Report generally discusses the results of our operations for the year ended March 31, 2025, compared with the year ended March 31, 2024. For a discussion of the results of our operations for the year ended March 31, 2024, compared with the year ended March 31, 2023, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report for the fiscal year ended March 31, 2024. The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs, and expected performance. The forward-looking statements are dependent upon events, risks, and uncertainties that may be outside our control. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those factors discussed below and elsewhere in this Annual Report, particularly in Item 1A. Risk Factors and the Cautionary Note Regarding Forward-Looking Statements, all of which are difficult to predict. In light of these risks, uncertainties, and assumptions, the forward-looking statements discussed may not occur. We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.

All U.S. dollar amounts, except share and per share amounts, in this Annual Report are in thousands.

Company Overview

Digital Turbine, Inc., through its subsidiaries (collectively “Digital Turbine” or the “Company”), is a leading independent mobile growth platform that levels up the landscape for advertisers, publishers, carriers, and device “OEMs”. We offer end-to-end products and solutions leveraging proprietary technology to all participants in the mobile application ecosystem, enabling brand discovery and advertising, user acquisition and engagement, and operational efficiency for advertisers. In addition, our products and solutions provide monetization opportunities for OEMs, carriers, and application (“app” or “apps”) publishers and developers.

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Recent Developments

Impact of Economic Conditions and Geopolitical Developments

Our results of operations are affected by macroeconomic conditions and geopolitical developments, including but not limited to levels of business and consumer confidence, actions taken by governments to counter inflation, potential trade disputes, including but not limited to any U.S. government actions against China based developers and publishers, Russia’s invasion of Ukraine, the conflict in Israel, Gaza, Lebanon and Syria, and the recent conflict between India and Pakistan.

Inflation, rising interest rates, supply chain disruptions and constraints, changes in regional or global business, political, macroeconomic and market conditions, including as a result of conflicts, hostilities, recessionary fears, the impact of global instability, domestic and foreign tariffs and other trade protectionist measures, and reduced business and consumer confidence have caused and may continue to cause a global slowdown of economic activity, which has caused and may continue to cause a decrease in demand for a broad variety of goods and services, including those provided by our clients.

We are impacted by declining volume of sales of new mobile devices by our partners. We believe this is driven by the impact of inflation, economic uncertainty, and their potential impacts on consumers. These negative macroeconomic trends have resulted, and may continue to result in, a decrease in mobile phone sales volume. Continued weakness in the sale of new mobile devices is likely to continue to impact our business, financial condition, and results of operations, the full impact of which remains uncertain at this time.

Further, various U.S. federal and state governmental agencies continue to examine the distribution and use of apps developed and/or published by China based companies. In some cases, government agencies have banned certain apps from mobile devices. Further actions by U.S. federal or state governmental agencies or other countries to restrict or ban the distribution of China based apps could negatively impact our business, financial condition, and results of operations.

While Russia’s invasion of Ukraine has not had a direct, material impact on our business, any European conflict, if expanded to include other countries, would likely have a material, negative impact on general economic conditions and would impact our business directly.

Additionally, we continue to actively monitor the recent developments in Israel, Gaza, Lebanon, and Syria for any material impacts to our business. While no adverse financial or operational impacts have been noted in the current period, if such conflict continues or escalates, it could have a potential negative impact on our business, given our significant presence in the region.

The extent of the impact of these macroeconomic factors on our operational and financial performance is also dependent on their impact on carriers and OEMs in relation to their sales of smartphones, tablets, and other devices, as well as the impact on application developers and in-app advertisers. If negative macroeconomic factors or geopolitical developments materially impact our partners over a prolonged period, our results of operations and financial condition could also be adversely impacted, the size and duration of which we cannot accurately predict at this time.

We continue to actively monitor these factors and we may take further actions that alter our business operations, as required, or that we determine are in the best interests of our employees, customers, partners, suppliers, and stockholders. In addition to monitoring the developments described above, the Company also considers the impact such factors may have on our accounting estimates and potential impairments of our non-current assets, which primarily consist of goodwill and finite-lived intangible assets. See Part I, Item 1A Risk Factors of this Annual Report on Form 10-K for further discussion of the potential adverse impacts of macroeconomic uncertainty on our business, including the risk factor titled “The effects of the current and any future general downturns in the U.S. and the global economy, including financial market disruptions, could harm the economic health of advertisers and the overall demand for advertising, which could have an adverse impact on our business, operating results, or financial condition.”

Credit Agreement

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The Company entered into a Fourth Amendment to the Credit Agreement with Bank of America, N.A. on August 6, 2024 (as amended and restated, from time to time, the “Amended and Restated Credit Agreement”) to revise certain covenants and address certain other matters. The Fourth Amendment to the Amended and Restated Credit Agreement amended the maximum consolidated secured net leverage covenant and the minimum consolidated interest coverage covenant to be retroactive to June 30, 2024, reduced the Revolver by $100,000 to $425,000 (while retaining the $75,000 accordion feature), increased the annual interest rate for highest leverage ratio results, SOFR plus between 1.50% and 3.75%, based on the Company’s consolidated leverage ratio, provided for payment against the outstanding balance of the revolving line of credit (the “Revolver”) to the extent the Company holds unrestricted cash in excess of $40,000 in the United States, reduced the permitted investments threshold limit for investments not otherwise permitted from $75,000 to $25,000 and added as 13-week cash flow forecast reporting requirement.

As of March 31, 2025, we had $411,000 drawn against the revolving line of credit under the Amended and Restated Credit Agreement. The proceeds from the borrowings were primarily used to finance past acquisitions. As of March 31, 2025, the interest rate was 8.17% and the unused line of credit fee was 0.35%, and we were in compliance with the consolidated secured net leverage ratio, consolidated interest coverage ratio, and other covenants under the Amended and Restated Credit Agreement.

The Company entered into a Fifth Amendment to the Amended and Restated Credit Agreement on June 13, 2025 to extend the maturity date of the Amended and Restated Credit Agreement from April 29, 2026 to August 29, 2026, revise certain covenants and address certain other matters. The Fifth Amendment removed the incremental term loan facility, reduced the amount of the Revolver from $425,000 to $411,000, increased the SOFR and letter of credit fee to 5.5%, and the base rate to 4.5% through August 29, 2025 with increases to 7.5% and 6.5%, respectively, after August 29, 2025, removed the consolidated interest coverage ratio, put in place a decreasing consolidated secured net leverage ratio starting at 5.25 and decreasing to 4.00 on and after June 30, 2026 and an increasing fix charge coverage ratio starting at 1.10 increasing to 1.30 on and after June 30, 2026, requires mandatory prepayments of net cash proceeds from equity issuances and certain other extraordinary receipts, and added certain covenants, including additional monthly reporting obligations, quarterly projections, biweekly 13-week cash flow forecast reporting, and other access rights. The Company is required to engage a financial advisor which will, among other things, provide written analyses, including variance analyses, of actual amounts and projected amounts as set forth in the Company’s business plan and budget and 13-week Cash Flow Forecasts and provide the lenders with reasonable access to the financial adviser to the lenders. The Company granted the lenders a security interest in additional assets, including the issued and outstanding equity of certain foreign subsidiaries, including Digital Turbine (EMEA) LTD., Fyber B.V. and Digital Turbine (IL) Ltd. The Company is required to pay an amendment fee equal to $8,220 at closing, $10,275 on September 2, 2025 and $1,027 due and payable at the end of each fiscal quarter (beginning on the fiscal quarter ending on September 30, 2025) until the earlier of maturity and the date the facility is repaid in full. In addition, the Company is required to pay an additional administrative collateral monitoring fee of $2,000 if certain closing deliveries with respect to the additional collateral are not satisfied within the timeframe set forth in the Fifth Amendment.

We are currently seeking to refinance the Amended and Restated Credit Agreement before August 29, 2025 and are exploring options to raise additional capital through a new credit facility with new lenders or the sale of equity securities or equity-linked or debt-financing arrangements. If we raise additional funds by issuing equity or equity-linked securities, it may be at a price and on terms and conditions that are less favorable to the Company, and the ownership of our existing stockholders will be diluted. If we raise additional financing by incurring new indebtedness, we may be subject to increased interest rates, increased fixed payment obligations and could also be subject to additional restrictive covenants and other operating restrictions that could adversely impact our ability to conduct our business. Any future indebtedness we incur may result in terms that could be less favorable to the Company. We cannot assure you that we will be able to refinance any of our indebtedness or enter into equity or equity-linked financing arrangements on commercially reasonable terms, or at all.

If the Company is unable refinance the existing Amended and Restated Credit Agreement before August 29, 2025, the Company’s indebtedness under the Amended and Restated Credit Agreement would be reclassified as short-term debt, which could have a material adverse effect on the Company’s business and stock price. There can be no assurance that we will be able to raise additional capital. The inability to raise capital would adversely affect our ability to achieve our business objectives and our expectations, our liquidity and ability to operate our business, our stock price and our ability to continue as a going concern. See Part I, Item 1A, Risk Factors, in this Annual Report on Form 10-K for more information regarding risks related to liquidity and capital resources.

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Transformation Program

Beginning in fiscal year 2023, the Company entered into a business transformation project that includes the implementation of a new, global cloud-based enterprise resource planning (“ERP”) system to upgrade our existing enterprise-wide operating systems. Additionally, a new human resource (“HR”) system was also implemented to streamline employee management processes and enhance organizational effectiveness. We are also undertaking the consolidation of existing ancillary systems and deploying other new platforms and systems to improve our operations and drive business and cost efficiencies.

This is a multi-year project that includes various costs, including software configuration and implementation costs that would be recognized as either capital expenditures or deferred costs in accordance with applicable accounting policies, with certain costs recognized as operating expense associated with project development and project management costs, and professional services with business partners engaged in the planning, design and business process review that would not qualify as software configuration and implementation costs. In addition, the Company is incurring duplicative personnel and other operating costs to maintain legacy systems and operations during the deployment of the new systems and certain other ancillary platforms and systems. The Company completed the first deployment phase in the third quarter of fiscal year 2024. Costs are anticipated to be incurred through various deployment phases that are expected to continue through early fiscal year 2026. The Company incurred $2,060 of business transformation costs during the year ended March 31, 2025. These costs are recorded in General and Administrative expenses and Product Development expenses in our Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.

Additionally, the Company is in the process of initiating further transformation efforts. In October 2024, the Company began a transformation program intended to improve various measures across the organization. These measures include but are not limited to current and future operating expenses, cash flows, and personnel costs. Additionally, the initiatives intend to simplify and streamline business operations, including product optimization, procurement and cost optimization, and team restructuring. As part of the transformation program, we implemented a two phased reduction in our workforce, one in November 2024 and the other in January 2025. During the fiscal year ended March 31, 2025, the Company incurred expenses of $2,886 related to our transformation program primarily consisting of severance and other one-time termination benefits. The transformation program includes several other initiatives that are underway, and the Company expects the transformation program to be substantially completed by the first quarter of fiscal year 2026. The transformation program is targeted to yield more than $25,000 in annual cash expense savings.

Costs incurred in connection with the transformation program are categorized under two primary headings: severance costs and business transformation costs. The costs classified as severance costs are inclusive of but not limited to expenses associated with workforce reductions aimed at realigning the Company’s structure as part of the transformation program. These severance-related expenses are directly tied to the Company's efforts to reduce headcount and optimize its labor force to better align with its long-term strategic goals. In addition, the business transformation costs primarily reflect investments made in the prior year for the upgrade of key business systems, including the implementation of a global cloud-based ERP system and a new HR system. These costs, while also part of the broader transformation efforts, are not related to workforce reductions but rather to the modernization of the Company’s technological infrastructure to support long-term operational improvements.

Goodwill and Intangible Assets

The process of evaluating the potential impairment of goodwill is subjective and requires significant judgment, including qualitative and quantitative factors such as the identification of reporting units, identification and allocation of assets and liabilities to reporting units, and determinations of fair value. In estimating the fair value of our reporting units when performing our annual impairment test, or when an indicator of impairment is present, we make estimates and significant judgments about the future cash flows of those reporting units and other estimates including appropriate discount rates. Discount rates can fluctuate based on various economic conditions including our capital allocation and interest rates, including the interest rates on U.S. treasury bonds. Changes in judgments on these assumptions and estimates, particularly expectations of revenue and cash flow growth rates in future periods and discount rates, could result in goodwill impairment charges.

In addition to evaluating goodwill for impairment when events or circumstances indicate they would more likely than not reduce the fair value of a reporting unit below its carrying value, the Company also evaluates goodwill for impairment on an annual basis. The Company’s performed its annual evaluation of goodwill as of March 31,

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2025, and no impairment of goodwill has been identified.

Finite-lived intangible assets and property, plant, and equipment have been assigned an estimated finite useful life and are amortized on a straight-line basis over the number of years that approximate their respective useful lives. The Company evaluates intangible assets other than goodwill for impairment at least annually or upon the occurrence of events or circumstances that indicate the carrying value of an asset may not be recoverable. In determining whether an impairment exists, the Company considers factors such as changes in the use of the asset, changes in the legal or business environment, and current or historical operating or cash flow losses.

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RESULTS OF OPERATIONS

The following table sets forth our results of operations for the years ended March 31, 2025 and 2024 (in thousands):

Net revenue ($ in thousands)

Fiscal 2025 compared to fiscal 2024

During the year ended March 31, 2025, net revenue decreased by $53,976 or 9.9% compared to the prior year. See the segment discussion below for further details regarding net revenue.

On Device Solutions

ODS revenue for the year ended March 31, 2025, decreased by $28,480 or 7.7% compared to the year ended March 31, 2024. Revenue from application media declined by approximately $28,938 primarily due to lower new device volume in the U.S. and internationally and a decrease in mobile advertising and user acquisition spending. Revenue from content media increased by approximately $458 primarily due to an increase in activity with content providers that resulted in higher active users on prepaid devices.

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App Growth Platform

AGP revenue for the year ended March 31, 2025, decreased by $25,531 or 14.3% compared to the year ended March 31, 2024. The decrease was primarily due to a decline in advertising exchange of approximately $20,857 due to broader weakness in mobile advertising markets and the impact of the consolidation and exiting of certain legacy AdColony platforms and business lines. Additionally, there was a decline in brand and performance advertising of approximately $4,674 due to broader weakness in mobile advertising markets.

Costs of revenue and operating expenses ($ in thousands)

Fiscal 2025 compared to fiscal 2024

For the year ended March 31, 2025, total costs of revenue and operating expenses decreased by $374,339 compared to the year ended March 31, 2024.

Total costs of revenue and operating expenses included impairment of goodwill charges of $336,640 during the year ended March 31, 2024. Excluding the impairment of goodwill, total costs of revenue and operating expenses decreased by $37,699 or 6.5% for the year ended March 31, 2025, compared to the year ended March 31, 2024.

The decrease in total costs of revenue and operating expenses after excluding the impairment of goodwill is primarily due to lower revenue share, which is the result of lower revenue over the same comparative periods, and lower product development costs. Costs of revenue and operating expenses included total business transformation costs, severance and acquisition-related costs of $2,060, $3,711 and $359, respectively, for the year ended March 31, 2025, compared to $9,418, $2,795, and $338, respectively, for the year ended March 31, 2024.

Revenue share

Revenue share includes amounts paid to our carrier and OEM partners, as well as app publishers and developers through revenue sharing arrangements or via direct cost-per-thousand (“CPM”), cost-per-install (“CPI”), cost-per-placement (“CPP”), or cost-per-acquisition (“CPA”) arrangements, and are recorded as a cost of revenue. In addition, when indirect arrangements exist through advertising aggregators (ad networks) and revenue is shared with our carrier and app development partners, the shared revenue is also recorded as a cost of revenue.

Revenue share decreased by $26,939 to $235,287 for the year ended March 31, 2025, and was 48.0% as a percentage of total net revenue compared to $262,226, or 48.2% of total net revenue, for the year ended March 31, 2024. The decrease in revenue share coincides with the decrease in total net revenue over the same periods, as these costs are typically paid as a percentage of our revenue. Revenue share as a percentage of total net revenue remained flat.

Other direct costs of revenue

Other direct costs of revenue are comprised primarily of hosting expenses directly related to the generation of revenue and depreciation expense associated with capitalized software costs and amortization of developed technology intangible assets.

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Other direct costs of revenue decreased by $258 or 0.7% to $34,541 for the year ended March 31, 2025, and was 7.0% as a percentage of total net revenue compared to $34,799, or 6.4% of total net revenue, for the year ended March 31, 2024.

The decrease in other direct costs of revenue for the year ended March 31, 2025, compared to the prior year, was primarily due to lower hosting costs and a decrease in amortization of internally developed software. These declines in costs were offset by an increase in bidding and platform fees. The increase in other direct costs as a percentage of total net revenue was primarily a result of the decline in total net revenue for the year ended March 31, 2025.

Product development

Product development expenses include the development and maintenance of the Company’s product suite and are primarily a function of personnel. Additionally, product development expenses include certain integration and business transformation costs, which may impact the comparability of product development expenses between periods.

Product development expenses decreased by $14,693 to $39,464 for the year ended March 31, 2025 compared to $54,157 for the year ended March 31, 2024. Product development expenses included severance costs of $697 for the year ended March 31, 2025. Product development expenses included business transformation, severance, and acquisition-related costs of $3,574 for the year ended March 31, 2024. Excluding severance costs, acquisition-related costs and business transformation costs, product development expenses decreased by $11,816 for the year ended March 31, 2025.

The decrease in product development expenses after excluding severance costs, acquisition-related costs and business transformation costs was primarily due to lower hosting and software costs of $4,162, employee-related costs of $3,404, third-party development costs of $1,933, and other operating costs, including facilities and travel of $2,363.

Sales and marketing

Sales and marketing expenses represent the costs of sales and marketing personnel, advertising and marketing campaigns, and campaign management. Additionally, sales and marketing expenses include certain integration and business transformation costs, which may impact the comparability of sales and marketing expenses between periods.

Sales and marketing expenses increased by $161 to $61,642 for the year ended March 31, 2025 compared to $61,481 for the year ended March 31, 2024. Sales and marketing expenses included severance costs of $1,947 for the year ended March 31, 2025. Sales and marketing expenses included severance costs, acquisition-related costs, and business transformation costs of $1,688 for the year ended March 31, 2024. Excluding business transformation costs, acquisition-related costs and severance costs, sales and marketing expenses decreased by $98 for the year ended March 31, 2025.

The decrease in sales and marketing expense after excluding business transformation costs, acquisition-related costs and severance costs was primarily due to lower costs for sales events and sales related travel of $1,379 and reduced facilities and other related costs of $1,650. These decreases were partially offset by increased professional services of $644 and personnel related costs of $2,287.

General and administrative

General and administrative expenses represent management, finance, and support personnel costs in both the parent and subsidiary companies, which include professional services and consulting costs, in addition to other costs such as rent, stock-based compensation, and depreciation and amortization expense. Additionally, general and administrative expenses include certain integration and business transformation costs, which may impact the comparability of general and administrative expenses between periods.

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General and administrative expenses increased by $4,030 to $173,647 for the year ended March 31, 2025 compared to $169,617 for the year ended March 31, 2024. General and administrative expenses included acquisition-related costs of $359, business transformation costs of $2,060 and severance costs of $1,067 for the year ended March 31, 2025. General and administrative expenses included acquisition-related costs of $424, business transformation costs of $6,639, and severance costs of $226 for the year ended March 31, 2024. Excluding acquisition-related costs, business transformation costs and severance costs, general and administrative expenses increased by $7,833 for the year ended March 31, 2025.

The increase in general and administrative expenses after excluding acquisition-related costs, business transformation costs and severance costs was primarily due to higher depreciation and amortization of $2,886, recruiting and relocation costs of $305, employee-related costs of $2,904, and other costs, consisting of supplies, software, and licenses of $3,200. These increases were partially offset by lower stock-based compensation of $425, bad debt expense of $710, and professional services including audit, tax, and legal fees of $328.

Impairment of Goodwill

The Company evaluates goodwill for impairment at least annually or upon the occurrence of events or circumstances that indicate they would more likely than not reduce the fair value of a reporting unit below its carrying value. During the year ended March 31, 2025, the Company sustained a decline in its forecasted operating trends, which was identified as a potential indicator of impairment for the Company’s AGP reporting unit. As a result, the Company performed a quantitative goodwill impairment evaluation over its reporting units ODS and AGP to determine if their respective fair values were below their carrying values. Based on the evaluation, the Company determined that neither reporting unit was impaired, and no impairment of goodwill was recognized for either the ODS or AGP reporting unit during the fiscal year 2025.

During the fiscal year ended March 31, 2024, the Company sustained a decline in the quoted market price of the Company’s common stock, an increase in interest rates, and the Company’s forecasted operating trends, which represented potential indicators of impairment related to the goodwill assigned to the AGP reporting unit for the three months ended September 30, 2023. The Company also performed its annual goodwill impairment evaluation as of March 31, 2024, noting continued trends in quoted market price, interest rates, and the Company’s forecast. As a result of these reviews, the Company recorded a $147,181 and $189,459 non-deductible, non-cash goodwill impairment charge, respectively, for a total of $336,640 to the AGP reporting unit during the fiscal year ended March 31, 2024. There was no impairment of goodwill for the ODS reporting unit during the year ended March 31, 2024.

For both of the goodwill impairment evaluations performed during the years ended March 31, 2025 and March 31, 2024, the fair value of each reporting unit was estimated using a weighted combination of the income approach, which incorporates the use of the discounted cash flow method, and the market approach. The Company’s interim and annual testing reflected a 75%/25% allocation between the income and market approaches. In both years, the Company believed the 75% weighting to the income approach to be appropriate, as it directly reflects its future growth and profitability expectations.

The discounted cash flow method requires significant assumptions and estimates, the most significant of which are projected future growth rates, capital expenditures, tax rates, gross margins and terminal values. In addition, the Company determines its weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested. For both impairment evaluations performed at March 31, 2025 and March 31, 2024, respectively, the Company reduced its estimated future cash flows, including revenues, gross profits, and EBITDA, relative to the previous evaluation, to reflect its best estimates at this time. In each evaluation the Company also updated key inputs for the discounted cash flow models, including weighted-average cost of capital, which incrementally decreased due to lower equity risk premium and the company specific premium.

The market approach estimates the fair value of the reporting unit by applying multiples of operating performance measures to the reporting unit’s operating performance. These multiples are derived from comparable publicly-traded companies with similar investment characteristics. For the March 31, 2025 impairment evaluation, as compared to the March 31, 2024 evaluation, the Company increased its EBITDA market multiples, reflecting increasing valuations across the Company’s selected peer group. The results of these updates, along with those made to the discounted cash flow models described above, indicated that the carrying value of each reporting unit did not exceed its respective fair value.

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Interest and other income (expense), net ($ in thousands)

Fiscal 2025 compared to fiscal 2024

Total interest and other income (expense), net, for the years ended March 31, 2025 and 2024, was approximately $33,789 and $30,693, respectively, an increase in net expenses of $3,096.

Change in fair value of contingent consideration

On a quarterly basis, the Company performs an assessment on the fair value of its contingent consideration associated with the Company’s acquisition of In App Video Services UK LTD. During the year ended March 31, 2025, the Company reassessed the fair value of its contingent consideration based on current forecasts. Based on the purchase agreement, executed on November 1, 2022, consideration included potential annual earn-out payments based on meeting annual revenue targets for the calendar years ended December 31, 2022, 2023, 2024, and 2025. The annual earn-out payments are up to $250 for the year ended December 31, 2022, and $1,000 for each of the calendar years ended December 31, 2023, 2024, and 2025. Also, an incremental earn-out payment will be made for each of the calendar years ended 2023, 2024, and 2025 in an amount equal to 25% of revenue that is more than 150% of that calendar year’s revenue target.

As a result of the Company’s assessments during the year ended March 31, 2025, a remeasurement loss equal to the change in fair value of $300 was recorded.

During the fiscal year ended March 31, 2025, In App Video Services UK LTD met the 2024 calendar achievement threshold and will receive a payout of approximately $1,000 in the first quarter of fiscal year 2026, and is included in other current liabilities. During the fiscal year ended March 31, 2024, the Company 1) paid approximately $1,100 for the earn-out associated with the calendar year ended December 31, 2023 and 2) recognized a change in the fair value of contingent consideration of $372. Changes in the fair value of the earn-out liability subsequent to the acquisition date are recognized in the consolidated statements of operations and comprehensive (loss) income.

Interest expense, net

For the years ended March 31, 2025 and 2024, the Company recorded net interest expense of $34,783 and $30,838, respectively, an increase of $3,945 or 12.8%. The increase was primarily due to an increase in interest rates of 82 basis points and higher average outstanding borrowings of $8,700 over the comparative period.

Foreign exchange transaction gain (loss)

For the years ended March 31, 2025 and 2024, the Company recorded foreign exchange transaction gains of $1,297 and $101, respectively, and was primarily attributable to fluctuations in foreign exchange rates for trade accounts receivables and payables denominated in currencies other than the functional currency of foreign entities.

Liquidity and Capital Resources

Liquidity

Our primary sources of liquidity are our cash and cash equivalents, cash from operations, and borrowings under our Amended and Restated Credit Agreement. As of March 31, 2025, we had unrestricted cash of approximately $39,393 and restricted cash of approximately $691. The Company had $14,000 available to draw under the Amended and Re

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stated Credit Agreement, excluding the accordion feature, subject to the required covenants. The Amended and Restated Credit Agreement matures on August 29, 2026. With the Fifth Amendment, as described below, the Revolver was reduced to $411,000, and was fully drawn as of June 13, 2025. We incurred a net loss of $(18,826) and $(92,099), respectively, and generated cash from operating activities of $11,508 and $11,880, respectively for the three and twelve months ended March 31, 2025.

Our principal cash requirements for the twelve-month period following this Report primarily consist of refinancing our Amended and Restated Credit Agreement and payment of interest and required principal payments thereunder in addition to personnel costs, contractual payment obligations, including office leases, cloud hosting costs, capital expenditures, minimum commitments under hosting agreements (see Liquidity and Capital Resources—Hosting Agreements below), cash outlays for income taxes, and cash requirements to fund working capital.

We have been and are continuing to explore various cost saving opportunities, namely through the Company’s transformation program, and we intend to continue seeking opportunities to generate additional revenue through operations. There can be no assurance that we will be successful in our plans described above. If we are unable to effectively implement additional cost reductions, generate additional revenue or refinance our Amended and Restated Credit Agreement or raise additional funding, we may be forced to delay, reduce or eliminate some or all of our strategic operational efforts and product and service expansion, and our business, financial condition and results of operations could be materially and adversely affected.

As described above, we are currently seeking to refinance the Amended and Restated Credit Agreement before August 29, 2025 and are exploring options to raise additional capital through a new credit facility with new lenders or the sale of equity securities or equity-linked or debt-financing arrangements. If we successfully refinance the Amended and Restated Credit Agreement by August 29, 2025 on acceptable terms, we believe our existing cash and cash equivalents, cash flow from operations and any available balance under a new financing arrangement would be sufficient to meet our working capital and other business requirements for at least 12 months from the filing date of this Report. However, our ability to meet our debt service obligations and to fund working capital, capital expenditures, and investments in our business will depend upon our future performance and our ability to access capital markets and refinance our Amended and Restated Credit Agreement, as well as financial, business, and other factors affecting our operations, many of which are beyond our control. These factors include general and regional economic, financial, competitive, legislative, regulatory, and other factors such as the U.S. and global economic climate uncertainty, the impact of tariffs, the state of the equity and debt markets and the ability to raise capital in such markets, health epidemics, economic and macro-economic factors like labor shortages, supply chain disruptions, and inflation, and geopolitical developments, including the conflict in Ukraine, the political climate related to China, and the conflict in Israel. We cannot guarantee we will generate sufficient cash flow from operations, or that future borrowings or capital markets will be available, in an amount sufficient to enable us to pay our debt, refinance our Amended and Restated Credit Agreement or to fund our other liquidity needs. See Part I, Item 1A, Risk Factors, in this Annual Report on Form 10-K for additional information related to the foregoing risks.

Capital Resources

Our outstanding secured indebtedness under the Amended and Restated Credit Agreement is $411,000 as of March 31, 2025. The maturity date of the Amended and Restated Credit Agreement is August 29, 2026, and the outstanding balance is classified as long-term debt, net of debt issuance costs of $2,313, on our consolidated balance sheets as of March 31, 2025. For further description of the terms of the Amended and Restated Credit Agreement, see Note 12—Debt under the heading “Revolver” in the notes to our consolidated financial statements under Part I, Item 1 of this Report.

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

Our Amended and Restated Credit Agreement also contains a maximum consolidated secured net leverage ratio and minimum consolidated interest coverage ratio. If we fail to satisfy these covenants, the lender may declare a default, which could lead to acceleration of the debt maturity. Any such default would have a material adverse effect on us.

The Company entered into a Fourth Amendment to the Amended and Restated Credit Agreement on August 6, 2024 to revise certain covenants and address certain other matters. The Company entered into a Fifth

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Amendment to the Amended and Restated Credit Agreement on June 13, 2025 to extend the maturity date of the Amended and Restated Credit Agreement from April 29, 2026 to August 29, 2026, revise certain covenants and address certain other matters. Refer to Note 12—Debt for further discussion. As of March 31, 2025, we were in compliance with all covenants under the Amended and Restated Credit Agreement.

As described above, we are currently seeking to refinance the Amended and Restated Credit Agreement before August 29, 2025 and are exploring options to raise additional capital through a new credit facility with new lenders or the sale of equity securities or equity-linked or debt-financing arrangements. If we raise additional funds by issuing equity or equity-linked securities, it may be at a price and on terms and conditions that are less favorable to the Company, and the ownership of our existing stockholders will be diluted. If we raise additional financing by incurring new indebtedness, we may be subject to increased interest rates, increased fixed payment obligations and could also be subject to additional restrictive covenants and other operating restrictions that could adversely impact our ability to conduct our business. Any future indebtedness we incur may result in terms that could be less favorable to the Company. We cannot assure you that we will be able to refinance any of our indebtedness or enter into equity or equity-linked financing arrangements on commercially reasonable terms, or at all.

If the Company is unable to refinance the existing Amended and Restated Credit Agreement before August 29, 2025, the Company’s indebtedness under the Amended and Restated Credit Agreement would be reclassified as short-term debt, which could have a material adverse effect on the Company’s business and stock price. There can be no assurance that we will be able to raise additional capital. The inability to raise capital would adversely affect our ability to achieve our business objectives and our expectations, our liquidity and ability to operate our business, our stock price and our ability to continue as a going concern. See Part I, Item 1A, Risk Factors, in this Annual Report on Form 10-K for more information regarding risks related to liquidity and capital resources.

Hosting Agreements

We enter into hosting agreements with service providers, and, in some cases, those agreements include minimum commitments that require us to purchase a minimum amount of service over a specified time period (“the minimum commitment period”). The minimum commitment period is generally one year in duration, and the hosting agreements include multiple minimum commitment periods. Our minimum purchase commitments under these hosting agreements total approximately $230,453 over the next five fiscal years.

Cash Flow Summary ($ in thousands)

Operating Activities

Our cash flows from operating activities are primarily driven by revenue generated from user acquisition and advertising activity, offset by the cash costs of operations, and are significantly influenced by the timing of and

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fluctuations in receipts from customers and payments to our carrier and publisher partners as well as other vendors. Our future cash flows from operating activities will be diminished if we cannot increase our revenue levels and manage costs appropriately. Cash provided by operating activities was $11,880 for the year ended March 31, 2025, compared to $28,677 for the year ended March 31, 2024. The decrease of $16,797 was due to the following:

•$328,349 decrease in net loss, which is primarily due to a goodwill impairment charge of $336,640 during the year ended March 31, 2024;

•$8,262 net decrease due to changes in operating assets and liabilities, driven primarily by working capital changes, specifically a decrease in the change in accounts payable offset by an increase in the change in accounts receivable, as well as a decrease in deferred tax liabilities;

• $336,884 net decrease in non-cash charges during the year ended March 31, 2025 primarily related to the impairment of goodwill reported for the year ended March 31, 2024.

Investing Activities

Our primary investing activities have consisted of acquisitions of businesses, purchases of property and equipment, and capital expenditures in support of creating and enhancing our technology infrastructure. For the year ended March 31, 2025, net cash used in investing activities decreased by $16,371 to $27,477. Our cash used in investing activities for the twelve months ended March 31, 2025 and March 31, 2024, was primarily comprised of capital expenditures related to internally-developed software.

Financing Activities

For the year ended March 31, 2025, net cash provided by financing activities was $23,281, which was comprised of: (1) the repayment of debt obligations of $13,000, (2) a payment of $1,627 for debt issuance costs, and (3) payment of payroll withholding taxes for net share settlement of equity awards of $465. These cash outflows were offset by cash inflows comprising of proceeds from borrowings of $38,000 and stock option exercises of $373.

For the year ended March 31, 2024, net cash used in financing activities was $29,300, which was comprised of: (1) the repayment of debt obligations of $77,134, (2) payment of payroll withholding taxes for net share settlement of equity awards of $1,286, and (3) payment of $3,751 for the acquisition of the remaining minority interest shareholders’ outstanding shares in one of our subsidiaries. These cash outflows were offset by cash inflows from proceeds from borrowings of $50,000 and stock option exercises of $2,871.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to contingencies, litigation, and goodwill and intangible assets acquired from our acquisitions. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

We generate revenue from transactions for the purchase and sale of digital advertising inventory through our various platforms and service offerings. Our revenue is based on fixed CPM, CPI, or CPA arrangements or a percentage of the ad spend through our platforms depending on the platform or service offering. We recognize revenue upon fulfillment of our performance obligation to our customers, which generally occurs at the point in time when an ad is rendered or an end consumer action, such as an app install, is completed.

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ODS - Application Media

Supply - Carriers and OEMs

We enter into contracts with carriers and OEMs for our ODS segment to help the customer control, manage, and monetize the mobile device through the marketing of application slots or advertisement space/inventory to advertisers and delivering the applications or advertisements to the mobile device. The Company generally offers these services under a revenue share model. These agreements typically include the following services: the access to a SaaS platform, hosting, solution features, and general support and maintenance. The Company has concluded that each promised service is delivered concurrently, interdependently, and continuously with all other promised services over the contract term and, as such, has concluded these promises are a single performance obligation that is delivered to the customer over a series of distinct service periods over the contract term. The Company meets the criteria for overtime recognition because the customer simultaneously receives and consumes the benefits provided by the Company’s performance as the Company performs, and the same method would be used to measure progress over each distinct service period. The fees for such services are not known at contract inception but are measurable during each distinct service period. The Company’s contracts do not include advance non-refundable fees. The Company’s fees for these services are based upon a revenue-share arrangement with the carrier or OEM. Both parties have agreed to share the revenue earned from third-party advertisers, discussed below, for these services.

Demand - Developers and Advertisers

The Company generally offers these services through CPI, CPP, and/or CPA arrangements with application developers and advertisers, generally in the form of insertion orders. The insertion orders specify the type of arrangement and additional terms such as advertising campaign budgets and timelines as well as any constraints on advertising types. These customer contracts can be open ended in regard to length of time and can renew automatically unless terminated; however, specific advertising campaigns are generally short-term in nature. Under these agreements, the Company delivers the customer’s applications to end user mobile devices. The Company gains access and control of application slots on wireless carrier and OEM mobile devices and markets those slots on their behalf to the Company’s customers.

The Company has concluded that the performance obligation within the contract is complete upon delivery of the application to the end user mobile device. Revenue recognition related to CPI and CPA arrangements is dependent upon an action of the end user. As a result, the transaction price is variable and is fully constrained until an install or action occurs. Revenue recognition related to CPP arrangements is dependent only upon the delivery of the application to the end user mobile device. As a result, revenue is recognized once delivery of the application has been completed as the Company’s performance obligation has been fulfilled.

ODS - Content Media

The Company generally offers programmatic advertising and targeted media content delivery services under CPM impression arrangements and page-view arrangements. Through its mobile phone first screen applications and mobile web portals, the Company markets ad space/inventory within its content products for display advertising. The ad space/inventory is allocated to the Company through arrangement with the carrier or OEM in the contracts discussed above. The Company controls this ad space/inventory and markets it on behalf of the carriers and OEMs to the advertisers. The Company’s advertising customers can bid on each individual display ad and the highest bid wins the right to fill each ad impression. Advertising agencies acting on the behalf of advertisers bid on the ad placement via the Company’s advertising exchange customers. When the bid is won, the ad will be received and placed on the mobile device by the Company. The entire process happens almost instantaneously and on a continuous basis. The advertising exchanges bill and collect from the winning bidders and provide daily and monthly reports of the activity to the Company. The Company has concluded that the performance obligation is satisfied at the point in time upon delivery of the advertisement to the device based on the impressions or page-view arrangement, as defined in the contract.

Through its mobile phone first screen applications and mobile web portals, the Company’s software platform also recommends sponsored content to mobile phone users and drives web traffic to a customer’s website. The Company markets this content to content sponsors, such as Outbrain or Taboola, similarly to the marketing of ad space/inventory. This sponsored content takes the form of articles, graphics, pictures, and similar content. The Company has concluded that the performance obligation within the contract is complete upon delivery of the content

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to the mobile device.

AGP - Marketplace

The Company, through its AGP segment, provides platforms that allow DSPs and publishers to buy and sell ad inventory, respectively, in a programmatic, real-time bidding auction. The Company generally contracts with DSPs through service orders. It also separately contracts with publishers through service orders to provide access to its auction platform and the ad inventory available through the platform. The auction is held when ad inventory becomes available. The exchange platform will send bid requests to various DSPs, which may choose to bid on the available ad inventory. Once a DSP wins an auction, it must deliver an ad, which is generally served through the Company’s software development kits (“SDK”). The entire auction process is nearly instantaneous. The Company bills the DSPs based on the total number of impressions and the bid price. It then remits the payment to the publishers, net of a revenue share agreed with the publisher that is generally a percentage of the DSPs’ total spending with the publisher through the platform.

AGP - Brand and Performance

The Company, through its AGP segment for its Brand and Performance offerings, contracts directly with advertisers or agencies. through insertion orders, which require the Company to fulfill advertising campaigns by identifying and purchasing targeted ad inventory and serving ads on behalf of the advertiser. The insertion orders or addendum communications provide advertising campaign details, such as campaign start and end date, target demographics, maximum budget, and rate. Rates are generally based on an end user action (CPI) or on a CPM basis. Revenue is recognized based on the rate and the number of impressions or end user actions at the time the ad is rendered or the end user action is completed.

Principal vs Agent Reporting

The determination of whether we act as a principal or as an agent in a transaction requires significant judgement and is based on our assessment of the terms of customer arrangements and the relevant accounting guidance. When we are the principal in a transaction, revenue is reported on a gross basis, which is the amount billed to DSPs, advertisers and agencies. When we are an agent in a transaction, revenue is reported net of revenue share paid to app publishers or developers.

The Company has determined that it is a principal for its advertiser services for application media and content media when it controls the application slots or ad space/inventory. This is because it has been allocated such slots or space from the carrier or OEM and is responsible for marketing or monetizing the slots or space. The advertisers look to the Company to acquire such slots or space, and the Company’s software is used to deliver the applications, ads or content to the mobile device. The Company also may manage application or ad campaigns of advertisers associated with these services. If the applications or advertisements are not delivered to the mobile device or the Company doesn’t comply with certain policies of the advertiser, the Company would be responsible and have to indemnify the customer for these issues. The Company also has discretion in setting the price of the slots or space based on market conditions, collects the transaction prices, and remits the revenue-share percentage of the transaction price to the carrier or OEM.

The Company recognizes the transaction price received from application developers, advertisers, content providers, or websites gross and the carrier or OEM share of such transaction price as costs of revenue - revenue share - in the accompanying consolidated statements of operations and comprehensive (loss) income.

The carrier or OEM may have the right to market and sell application slots or ad space to advertisers using the Company’s software. The carrier or OEM will share revenue with the Company when it does so. The Company recognizes the revenue shared by the carrier or OEM on a net basis as the Company is not considered the primary obligor in these transactions.

The Company has determined that it is a principal for its Brand and Performance offerings as the advertisers or agencies provide parameters for their target audiences, as well as a budget for ad campaigns. Once an advertiser or advertising agency provides its specifications, the Company has the discretion to fulfill the campaign by utilizing its data and proprietary technology. The Company controls the service because it has the ultimate discretion in purchasing ad inventory; and once an ad inventory slot is purchased, filling that ad inventory slot. As a result, the Company reports the revenue billed to advertisers and agencies on a gross basis and revenue

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shares paid to publishers as revenue share.

The Company has determined that it is an agent in transactions on its Marketplace platforms. The Company acts as an intermediary between DSPs and publishers by providing access to a platform and the SDKs that allow both parties to transact in the buying and selling of ad inventory. The transaction price is determined through a real-time auction and the Company has no pricing discretion or obligation related to the fulfillment of the advertising delivery.

Software Development Costs

The Company applies the principles of FASB ASC 985-20, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed (“ASC 985-20”). ASC 985-20 requires that software development costs incurred in conjunction with product development be charged to research and development expense until technological feasibility is established. Thereafter, until the product is released for sale, software development costs must be capitalized and reported at the lower of the unamortized cost or net realizable value of the related product. At this time, the Company does not invest significant capital into the research and development phase of new products and features as the technological feasibility aspect of its platform products has either already been met or is met very quickly.

The Company has adopted the “tested working model” approach to establishing technological feasibility for its products. Under this approach, the Company does not consider a product in development to have passed the technological feasibility milestone until the Company has completed a model of the product that contains essentially all the functionality and features of the final product and has tested the model to ensure that it works as expected.

The Company considers the following factors in determining whether costs can be capitalized: the emerging nature of the mobile market; the gradual evolution of the wireless carrier platforms and devices for which it develops products; the lack of pre-orders or sales history for its products; the uncertainty regarding a product’s revenue-generating potential; its lack of control over the carrier distribution channel resulting in uncertainty as to when, if ever, a product will be available for sale; and its historical practice of canceling products at any stage of the development process.

After products and features are released, all product maintenance cost are expensed.

The Company also applies the principles of FASB ASC 350-40, Accounting for the Cost of Computer Software Developed or Obtained for Internal Use (“ASC 350-40”). ASC 350-40 requires that software development costs incurred before the preliminary project stage be expensed as incurred. The Company capitalizes development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the functions intended.

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740-10, Accounting for Income Taxes (“ASC 740-10”), which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in its financial statements or tax returns. Under ASC 740-10, the Company determines deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of assets and liabilities, along with net operating losses, if it is more likely than not the tax benefits will be realized using the enacted tax rates in effect for the year in which it expects the differences to reverse. To the extent a deferred tax asset cannot be recognized, a valuation allowance is established, if necessary.

The Company is required to evaluate its ability to realize its deferred tax assets using all available evidence, both positive and negative, and determine if a valuation allowance is needed. Further, ASC 740-10-30-18 outlines the four possible sources of taxable income that may be available to realize a tax benefit for deductible temporary differences and carry-forwards. The sources of taxable income are listed below from least to most subjective:

•Future reversals of existing taxable temporary differences

•Future taxable income exclusive of reversing temporary differences and carryforwards

•Taxable income in prior carryback year(s) if carryback is permitted under the tax law

•Tax-planning strategies that would, if necessary, be implemented to, for example:

◦Accelerate taxable amounts to utilize expiring carryforwards

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◦Change the character of taxable or deductible amounts from ordinary income or loss to capital gain or loss

◦Switch from tax-exempt to taxable investments

ASC 740-10 prescribes that a company should use a more-likely-than-not recognition threshold based on the technical merits of the tax position taken. Tax positions that meet the more-likely-than-not recognition threshold should be measured as the largest amount of the tax benefits, determined on a cumulative probability basis, which is more likely than not to be realized upon ultimate settlement in the financial statements. We recognize interest and penalties related to income tax matters as a component of the provision for income taxes.

The Company’s income is subject to taxation in both the U.S. and foreign jurisdictions. Significant judgment is required in evaluating the Company’s tax positions and determining its provision for income taxes. The Company establishes reserves for income tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves for tax contingencies are established when the Company believes that positions do not meet the more-likely-than-not recognition threshold. The Company adjusts uncertain tax liabilities in light of changing facts and circumstances, such as the outcome of a tax audit or lapse of a statute of limitations. The provision for income taxes includes the impact of uncertain tax liabilities and changes in liabilities that are considered appropriate.

Stock-Based Compensation

We measure and recognize compensation expense for all stock-based awards made to employees and non-employee directors based on estimated fair values on the date of grant. To determine the fair value of the stock-based awards, we use the closing price of our common stock publicly traded on the Nasdaq on the date of grant for time-based and performance-based restricted stock awards, and we utilize the Black-Scholes option pricing model to value stock options, which involves the input of subjective assumptions, including the expected volatility of our common stock, interest rates, dividend rates, and an option’s expected life. As a result, the financial statements include amounts that are based on our best estimates and judgments for the expenses recognized for stock-based compensation. The compensation expense is recognized on a straight-line basis over the requisite service or performance period. The Company may issue either new shares or treasury shares upon exercise of these awards. The Company accounts for forfeitures as they occur and records any excess tax benefits or deficiencies from equity awards in the Consolidated Statement of Operations in the reporting period for which the exercises occur. Performance-based restricted units (“PSUs”) are evaluated on a quarterly basis for probability of meeting performance metrics and any adjustments to share-based compensation expense are then made in the quarter of evaluation. For PSUs, we must also make assumptions regarding the likelihood of achieving performance metrics. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be materially affected.

Business Combinations

We allocate the purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. The excess of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, estimated replacement costs and future expected cash flows from acquired users, acquired technology, acquired patents, and acquired trade names from a market participant perspective. Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Allocation of purchase consideration to identifiable assets and liabilities affects Company amortization expense, as acquired finite-lived intangible assets are amortized over the useful life, whereas any indefinite lived intangible assets, including goodwill, are not amortized. During the measurement period, which is not to exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Goodwill

We evaluate goodwill for possible impairment at least annually or upon the occurrence of events or circumstances that indicate that they would more likely than not reduce the fair value of a reporting unit below its

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carrying amount. When the Company completes a quantitative assessment of goodwill impairment, the fair value of each reporting unit is determined and compared to the reporting unit’s carrying value. If the carrying value of a reporting unit exceeds the fair value, a goodwill impairment charge is recorded. Determining the fair value of a reporting unit required the Company to make assumptions and estimates, the most significant of which are projected future growth rates, discount rates, capital expenditures, tax rates, gross margins and terminal value. Changes in key estimates or market conditions, could result in an impairment charge. For the year ended March 31, 2025, no impairment was recorded. During the year ended March 31, 2024, the Company recorded total impairment of goodwill of $336,640. Refer to Note 6—Goodwill and Intangible Assets for further details.

Recently Issued Accounting Pronouncements

Recent accounting pronouncements are detailed in Note 2—Basis of Presentation and Summary of Significant Accounting Policies, to our consolidated financial statements included in Part II, Item 8 of this Annual Report.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated financial statements and the notes appearing in Item 8. Financial Statements and Supplementary Data. This section of our Annual Report generally discusses the results of our operations for the year ended March 31, 2024, compared with the year ended March 31, 2023. For a discussion of the results of our operations for the year ended March 31, 2023, compared with the year ended March 31, 2022, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report for the fiscal year ended March 31, 2023. The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs, and expected performance. The forward-looking statements are dependent upon events, risks, and uncertainties that may be outside our control. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those factors discussed below and elsewhere in this Annual Report, particularly in Item 1A. Risk Factors and the Cautionary Note Regarding Forward-Looking Statements, all of which are difficult to predict. In light of these risks, uncertainties, and assumptions, the forward-looking statements discussed may not occur. We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.

All U.S. dollar amounts, except share and per share amounts, in this Annual Report are in thousands.

Company Overview

Digital Turbine, Inc., through its subsidiaries (collectively “Digital Turbine” or the “Company”), is a leading independent mobile growth platform that levels up the landscape for advertisers, publishers, carriers, and device “OEMs”. We offer end-to-end products and solutions leveraging proprietary technology to all participants in the mobile application ecosystem, enabling brand discovery and advertising, user acquisition and engagement, and operational efficiency for advertisers. In addition, our products and solutions provide monetization opportunities for OEMs, carriers, and application (“app” or “apps”) publishers and developers.

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Recent Developments

Credit Agreement

The Company entered into a Third Amendment to the New Credit Agreement (as defined under the caption “Revolver” in Note 11—Debt of the notes to the consolidated financial statements in Part II, Item 8 of this Annual Report) on February 5, 2024 to provide further financing flexibility to fund strategic growth initiatives and meet general corporate obligations. The Third Amendment to the New Credit Agreement amended the maximum consolidated secured net leverage covenant and the minimum consolidated net interest coverage covenant. In addition, it increased the limit of permitted, other investments, including equity investments and joint ventures from $20,000 in the aggregate in any fiscal year of the Company to $75,000 and increased the annual interest rate, which will be SOFR plus between 1.50% and 2.75%, based on the Company’s consolidated secured net leverage ratio.

As of March 31, 2024, we had $386,000 drawn against the revolving line of credit under the New Credit Agreement. The proceeds from the borrowings were primarily used to finance past acquisitions. As of March 31, 2024, the interest rate was 7.71% and the unused line of credit fee was 0.35%, and we were in compliance with the consolidated leverage ratio, interest coverage ratio, and other covenants under the New Credit Agreement.

Business Transformation Initiative

Beginning in fiscal year 2023, the Company entered into a business transformation project that includes the implementation of a new, global cloud-based enterprise resource planning (“ERP”) system to upgrade our existing enterprise-wide operating systems. Additionally, a new human resource system was also implemented to streamline employee management processes and enhance organizational effectiveness. We are also undertaking the consolidation of existing ancillary systems and deploying other new platforms and systems to improve our operations and drive business and cost efficiencies.

This is a multi-year project that includes various costs, including software configuration and implementation costs that would be recognized as either capital expenditures or deferred costs in accordance with applicable accounting policies, with certain costs recognized as operating expense associated with project development and project management costs, and professional services with business partners engaged in the planning, design and business process review that would not qualify as software configuration and implementation costs. In addition, the Company is incurring duplicative personnel and other operating costs to maintain legacy systems and operations during the deployment of the new systems and certain other ancillary platforms and systems. The Company completed the first deployment phase in the third quarter of fiscal year 2024. Costs are anticipated to be incurred through various deployment phases that are expected to continue through early fiscal year 2026. The Company incurred $9,417 of business transformation costs in the twelve months ended March 31, 2024. These costs are recorded in General and Administrative expenses and Product Development expenses in our Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.

Impact of Economic Conditions and Geopolitical Developments

Our results of operations are affected by macroeconomic conditions and geopolitical developments, including but not limited to levels of business and consumer confidence, actions taken by governments to counter inflation, potential trade disputes, including but not limited to any U.S. government actions against China based app developers and publishers, the recent conflict in Israel, and Russia’s invasion of Ukraine.

Inflation, rising interest rates, supply chain disruptions, and reduced business and consumer confidence have caused and may continue to cause a global slowdown of economic activity, which has caused and may continue to cause a decrease in demand for a broad variety of goods and services, including those provided by our clients.

We are impacted by the volume of sales of new mobile devices by our partners, which has been below our expectations. We believe this is driven by the impact of inflation, economic uncertainty, and their potential impacts on consumers. These negative macroeconomic trends have resulted, and may continue to result, in a decrease in mobile phone sales volume. Continued weakness in the sale of new mobile devices is likely to continue to impact our business, financial condition, and results of operations, the full impact of which remains uncertain at this time.

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Further, various U.S. federal and state governmental agencies continue to examine the distribution and use of apps developed and/or published by China based companies. In some cases, government agencies have banned certain apps from mobile devices. Further actions by U.S. federal or state governmental agencies or other countries to restrict or ban the distribution of China based apps could negatively impact our business, financial condition, and results of operations.

While the financial impact of Russia’s invasion of Ukraine has not had a direct, material impact on our business, any European conflict, if expanded to include other countries would likely have a material, negative impact on general economic conditions and would impact our business directly.

Additionally, we continue to actively monitor the recent and ongoing conflict in Israel and the Gaza Strip for any material impacts to our business. While no adverse financial or operational impacts have been noted in the current period, if such conflict continues or escalates, it could have a potential negative impact on our business, given our significant presence in the region.

The extent of the impact of these macroeconomic factors on our operational and financial performance is also dependent on their impact on carriers and OEMs in relation to their sales of smartphones, tablets, and other devices, as well as the impact on application developers and in-app advertisers. If negative macroeconomic factors or geopolitical developments continue to materially impact our partners over a prolonged period, our results of operations and financial condition could also be adversely impacted, the size and duration of which we cannot accurately predict at this time.

We continue to actively monitor these factors and we may take further actions that alter our business operations, as required, or that we determine are in the best interests of our employees, customers, partners, suppliers, and stockholders. In addition to monitoring the developments described above, the Company also considers the impact such factors may have on our accounting estimates and potential impairments of our non-current assets, which primarily consist of goodwill and finite-lived intangible assets.

The process of evaluating the potential impairment of goodwill is subjective and requires significant judgment, including qualitative and quantitative factors such as the identification of reporting units, identification and allocation of assets and liabilities to reporting units, and determinations of fair value. In estimating the fair value of our reporting units when performing our annual impairment test, or when an indicator of impairment is present, we make estimates and significant judgments about the future cash flows of those reporting units and other estimates including appropriate discount rates. Discount rates can fluctuate based on various economic conditions including our capital allocation and interest rates, including the interest rates on U.S. treasury bonds. Changes in judgments on these assumptions and estimates could result in goodwill impairment charges.

Finite-lived intangible assets and property, plant, and equipment are amortized or depreciated over their estimated useful lives on a straight-line basis. We monitor conditions related to these assets to determine whether events and circumstances warrant a revision to the remaining amortization or depreciation period or an impairment. We test these assets for potential impairment whenever we conclude events or changes in circumstances indicate carrying amounts may not be recoverable.

As of March 31, 2024, we considered the developments discussed above, our current operating results, and our estimates of future operating results. Please see Note 2—Basis of Presentation and Summary of Significant Accounting Policies for further information.

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RESULTS OF OPERATIONS

The following table sets forth our results of operations for the years ended March 31, 2024 and 2023 (in thousands):

Net revenue ($ in thousands)

Fiscal 2024 compared to fiscal 2023

During the year ended March 31, 2024, net revenue decreased by $121,438 or 18.2% compared to the prior year. See the segment discussion below for further details regarding net revenue.

On Device Solutions

ODS revenue for the year ended March 31, 2024, decreased by $50,216 or 11.9% compared to the year ended March 31, 2023. Revenue from content media declined by approximately $30,812 primarily due to the end of a carrier partnership that resulted in lower daily active users on prepaid devices. Revenue from application media declined by approximately $19,403 primarily due to lower new device volume in the U.S. and internationally and weakness in mobile advertising and user acquisition spending.

App Growth Platform

AGP revenue for the year ended March 31, 2024, decreased by $74,235 or 29.3% compared to the year ended March 31, 2023. The decrease was primarily due to a decline in brand and performance advertising of approximately $41,963 and a decline in advertising exchange of approximately $21,275 due to broader weakness in

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mobile advertising markets and the impact of the consolidation and exiting of certain legacy AdColony platforms and business lines. In addition, there was a decline of approximately $10,997, primarily due to the end of a reseller partnership in the Nordic region.

Costs of revenue and operating expenses ($ in thousands)

Fiscal 2024 compared to fiscal 2023

For the year ended March 31, 2024, total costs of revenue and operating expenses increased by $299,165 compared to the year ended March 31, 2023.

Total costs of revenue and operating expenses included total impairment of goodwill charges of $336,640. Excluding the impairment of goodwill, total costs of revenue and operating expenses decreased by $37,475 or 6.0% for the year ended March 31, 2024, compared to the year ended March 31, 2023.

The increase in total costs of revenue and operating expenses is primarily due to the impairment of goodwill charges in 2024 of $336,640 partially offset by lower revenue share, which is the result of lower revenue over the same comparative periods. Costs of revenue and operating expenses included total business transformation costs, severance and transaction costs of $9,418, $2,795 and $338, respectively, for the year ended March 31, 2024, compared to $0, $2,174, and $4,739, respectively, for the year ended March 31, 2023.

Revenue share

Revenue share includes amounts paid to our carrier and OEM partners, as well as app publishers and developers through revenue sharing arrangements or via direct cost-per-thousand (“CPM”), cost-per-install (“CPI”), cost-per-placement (“CPP”), or cost-per-acquisition (“CPA”) arrangements, and are recorded as a cost of revenue. In addition, when indirect arrangements exist through advertising aggregators (ad networks) and revenue is shared with our carrier and app development partners, the shared revenue is also recorded as a cost of revenue.

Revenue share decreased by $47,021 to $262,226 for the year ended March 31, 2024, and was 48.2% as a percentage of total net revenue compared to $309,247, or 46.4% of total net revenue, for the year ended March 31, 2023.

The increase in revenue share as a percentage of total net revenue for the year ended March 31, 2024, compared to the prior year, was primarily due to revenue mix changes, specifically net revenue from AGP, which has a higher margin profile, representing a lower portion of total revenue. In addition, the year ended March 31, 2024 included the benefit of a contractual revenue share adjustment with an ODS partner.

Other direct costs of revenue

Other direct costs of revenue are comprised primarily of hosting expenses directly related to the generation of revenue and depreciation expense associated with capitalized software costs and amortization of developed technology intangible assets.

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Other direct costs of revenue decreased by $1,646 or 4.5% to $34,799 for the year ended March 31, 2024, and was 6.4% as a percentage of total net revenue compared to $36,445, or 5.5% of total net revenue, for the year ended March 31, 2023.

The decrease in other direct costs of revenue for the year ended March 31, 2024, compared to the prior year, was primarily due to slightly lower amortization of developed technology intangible assets and lower hosting costs. The increase in other direct costs as a percentage of total net revenue was due to the decline in total net revenue for the year ended March 31, 2024.

Product development

Product development expenses include the development and maintenance of the Company’s product suite and are primarily a function of personnel. Additionally, product development expenses include certain integration and business transformation costs, which may impact the comparability of product development expenses between periods.

Product development expenses decreased by $2,329 to $54,157 for the year ended March 31, 2024 compared to $56,486 for the year ended March 31, 2023. Product development expenses included severance costs and acquisition-related costs of $858 and business transformation costs of $2,716 for the year ended March 31, 2024. Product development expenses included severance costs and acquisition-related costs of $2,233 for the year ended March 31, 2023. Excluding severance costs, acquisition-related costs and business transformation costs, product development expenses decreased by $3,670 for the year ended March 31, 2024.

The decrease in product development expenses after excluding severance costs, acquisition-related costs and business transformation costs was primarily due to lower employee-related costs of $948, depreciation and amortization expense of $3,085, reduced third-party development costs of $1,530, and other operating costs, including facilities and travel of $1,817. These decreases were partially offset by higher hosting and software costs of $3,709.

Sales and marketing

Sales and marketing expenses represent the costs of sales and marketing personnel, advertising and marketing campaigns, and campaign management. Additionally, sales and marketing expenses include certain integration and business transformation costs, which may impact the comparability of sales and marketing expenses between periods.

Sales and marketing expenses decreased by $1,814 to $61,481 for the year ended March 31, 2024 compared to $63,295 for the year ended March 31, 2023. Sales and marketing expenses included business transformation costs, acquisition-related costs and severance costs of $1,688 for the year ended March 31, 2024. Sales and marketing expenses included acquisition-related costs and severance costs of $1,836 for the year ended March 31, 2023. Excluding business transformation costs, acquisition-related costs and severance costs, sales and marketing expenses decreased by $1,666 for the year ended March 31, 2024.

The decrease in sales and marketing expense after excluding business transformation costs, acquisition-related costs and severance costs was primarily due to lower costs for sales events and sales related travel of $863, reduced recruiting and relocation of sales personnel of $405, a reduction in the use of professional services of $410, and lower facilities and other related costs of $398, partially offset by an increase of personnel related costs of $411.

General and administrative

General and administrative expenses represent management, finance, and support personnel costs in both the parent and subsidiary companies, which include professional services and consulting costs, in addition to other costs such as rent, stock-based compensation, and depreciation and amortization expense. Additionally, general and administrative expenses include certain integration and business transformation costs, which may impact the comparability of general and administrative expenses between periods.

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General and administrative expenses increased by $15,335 to $169,617 for the year ended March 31, 2024 compared to $154,282 for the year ended March 31, 2023. General and administrative expenses included acquisition-related costs of $424, business transformation costs of $6,639 and severance costs of $226 for the year ended March 31, 2024. General and administrative expenses included acquisition-related costs of $2,496 and severance costs of $350 for the year ended March 31, 2023. Excluding acquisition-related costs, business transformation costs and severance costs, general and administrative expenses increased by $10,892 for the year ended March 31, 2024.

The increase in general and administrative expenses after excluding acquisition-related costs, business transformation costs and severance costs was primarily due to higher stock-based compensation of approximately $3,233, depreciation and amortization of $8,136, and professional services including audit, tax and legal fees, of $693. These increases were partially offset by lower employee-related costs of approximately $570, bad debt expense of approximately $63, recruiting and relocation costs of $134, and other operating costs, including software and travel of approximately $402.

Impairment of Goodwill

The Company evaluates goodwill for impairment at least annually or upon the occurrence of events or circumstances that indicate they would more likely than not reduce the fair value of a reporting unit below its carrying value. As a result of the triggering event described below, the Company performed a goodwill impairment evaluation as of September 30, 2023. In addition to this, the Company performed its annual impairment evaluation as of March 31, 2024. For both periods evaluated, the Company determined that the fair value of the AGP reporting unit was below its carrying value. As a result of these evaluations, the Company recorded two separate impairment charges during fiscal year 2024.

During the three months ended September 30, 2023, as a result of sustained decline in the quoted market price of the Company’s common stock, increase in interest rates, and the Company’s forecasted operating trends, the Company identified interim indicators of impairment related to the goodwill assigned to the AGP reporting unit. The Company completed an interim impairment assessment of its goodwill, and as a result of this review, recorded a $147,181 non-deductible, non-cash goodwill impairment charge for the AGP reporting unit as of September 30, 2023.

Additionally, the Company performed its annual goodwill impairment evaluation as of March 31, 2024, noting continued trends in quoted market price, interest rates, and the Company’s forecast as described above. The Company completed the annual impairment assessment of its goodwill, and as a result, recorded an additional $189,459 non-deductible, non-cash goodwill impairment charge for the AGP reporting unit as of March 31, 2024. Total non-deductible, non-cash goodwill impairment charges for the AGP reporting unit for the twelve months ended March 31, 2024, was $336,640.

For each goodwill impairment evaluation performed at September 30, 2023 and March 31, 2024, respectively, the fair value of each reporting unit was estimated using a weighted combination of the income approach, which incorporates the use of the discounted cash flow method, and the market approach (the “Guideline Public Company Method”). The Company’s interim and annual testing reflected a 75%/25% allocation between the income and market approaches. The Company believes the 75% weighting to the income approach is appropriate, as it directly reflects its future growth and profitability expectations.

The discounted cash flow method requires significant assumptions and estimates, the most significant of which are projected future growth rates, capital expenditures, tax rates, gross margins and terminal values. In addition, the Company determines its weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested. For the September 30, 2023 impairment evaluation, as compared to the Company’s annual evaluation as of March 31, 2023, the Company reduced its estimated future cash flows used in the impairment assessment, including revenues, gross profits, and EBITDA to reflect its best estimates at that time. For the March 31, 2024 annual impairment evaluation, as compared to the Company’s interim evaluation as of September 30, 2023, the Company further reduced its estimated future cash flows, including revenues, gross profits, and EBITDA to reflect its best estimates at this time. In each evaluation, the Company also updated key inputs for the discounted cash flow models, including the weighted-average cost of capital, which incrementally increased due to higher interest rates, market volatility, and the company specific premium.

The market approach estimates the fair value of the reporting unit by applying multiples of operating performance measures to the reporting unit’s operating performance. These multiples are derived from comparable publicly-traded companies with similar investment characteristics. For the September 30, 2023 impairment evaluation, as compared to the March 31, 2023 testing, the Company reduced its revenue and EBITDA market multiples, reflecting declining valuations across the Company’s selected peer group. For the March 31, 2024 impairment evaluation, as compared to the September 30, 2023 evaluation, the Company further reduced its

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revenue and EBITDA market multiples, reflecting declining valuations across the Company’s selected peer group. These updates, along with those made to the discounted cash flow models described above, had significant impacts on the estimated fair values of the Company’s reporting units.

There was no impairment of goodwill for the ODS reporting unit during the fiscal year.

Interest and other income (expense), net ($ in thousands)

Fiscal 2024 compared to fiscal 2023

Total interest and other income (expense), net, for the years ended March 31, 2024 and 2023, was approximately $30,693 and $24,149, respectively, an increase in net expenses of $6,544.

Change in fair value of contingent consideration

For the year ended March 31, 2023, the Company did not record a charge for changes in fair value of contingent consideration in connection with earn-outs associated with its recent acquisitions. For the year ended March 31, 2024, the company reassessed the fair value of the earn-out liability associated with its recent acquisition of In App Video Services UK LTD. and recorded a remeasurement gain equal to the change in fair value of $372.

Interest expense, net

For the years ended March 31, 2024 and 2023, the Company recorded net interest expense of $30,838 and $23,352, respectively, an increase of $7,486 or 32.1%. The increase was primarily due to an increase in interest rates of 262 basis points and lower average outstanding borrowings of $65,500 over the comparative period. Another driving factor of the increase was the Company’s entrance into a Third Amendment to the New Credit Agreement on February 5, 2024, which increased the annual interest rate to SOFR plus between 1.50% and 2.75%, based on the Company’s consolidated secured net leverage ratio.

Foreign exchange transaction gain (loss)

For the years ended March 31, 2024 and 2023, the Company recorded foreign exchange transaction gain and loss of $101 and $1,026, respectively, and was primarily attributable to fluctuations in foreign exchange rates for trade accounts receivables and payables denominated in currencies other than the functional currency of foreign entities.

Liquidity and Capital Resources

Our primary sources of liquidity are our cash and cash equivalents, cash from operations, and borrowings under our New Credit Agreement. As of March 31, 2024, we had unrestricted cash of approximately $32,916 and $139,000 available to draw under the New Credit Agreement with BoA, excluding the accordion feature, subject to the required covenants. We generated $28,677 in cash flows from operating activities for the twelve months ended March 31, 2024.

Our ability to meet our debt service obligations and to fund working capital, capital expenditures, and investments in our business will depend upon our future performance, which will be subject to availability of borrowing capacity under our credit facility and our ability to access capital markets as well as financial, business, and other factors affecting our operations, many of which are beyond our control. These factors include general and regional economic, financial, competitive, legislative, regulatory, and other factors such as health epidemics,

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economic and macro-economic factors like labor shortages, supply chain disruptions, and inflation, and geopolitical developments, including the conflict in Ukraine, the political climate related to China, and the conflict in Israel. We cannot guarantee we will generate sufficient cash flow from operations, or that future borrowings or capital markets will be available, in an amount sufficient to enable us to pay our debt or to fund our other liquidity needs.

We believe we will generate sufficient cash flow from operations and have the liquidity and capital resources to meet our business requirements for at least 12 months from the filing date of this Annual Report.

Outstanding Secured Indebtedness

Our outstanding secured indebtedness under the New Credit Agreement is $386,000 as of March 31, 2024. The maturity date of the New Credit Agreement is April 29, 2026, and the outstanding balance is classified as long-term debt, net of debt issuance costs of $2,510, on our consolidated balance sheets as of March 31, 2024. For further description of the terms of the New Credit Agreement, see Note 11—Debt under the heading “Revolver” in the notes to our consolidated financial statements under Part II, Item 8 of this Annual Report.

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

Our credit facility also contains a maximum consolidated secured net leverage ratio and minimum consolidated interest coverage ratio. If we fail to satisfy these covenants, the lender may declare a default, which could lead to acceleration of the debt maturity. Any such default would have a material adverse effect on us.

As of March 31, 2024, we were in compliance with all covenants under the New Credit Agreement. Additionally, we entered into a Third Amendment to the New Credit Agreement on February 5, 2024 to provide further financing flexibility to fund growth initiatives and meet general corporate obligations. Refer to Note 11—Debt for further discussion.

Hosting Agreements

We enter into hosting agreements with service providers, and, in some cases, those agreements include minimum commitments that require us to purchase a minimum amount of service over a specified time period (“the minimum commitment period”). The minimum commitment period is generally one year in duration, and the hosting agreements include multiple minimum commitment periods. Our minimum purchase commitments under these hosting agreements total approximately $269,315 over the next six fiscal years.

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Cash Flow Summary ($ in thousands)

Operating Activities

Our cash flows from operating activities are primarily driven by revenue generated from user acquisition and advertising activity, offset by the cash costs of operations, and are significantly influenced by the timing of and fluctuations in receipts from customers and payments to our carrier and publisher partners as well as other vendors. Our future cash flows from operating activities will be diminished if we cannot increase our revenue levels and manage costs appropriately. Cash provided by operating activities was $28,677 for the year ended March 31, 2024, compared to $113,376 for the year ended March 31, 2023. The decrease of $84,699 was due to the following:

•$437,318 decrease in net income, which includes the goodwill impairment charge of $336,640.

•$1,955 increase due to changes in operating assets and liabilities, driven primarily by working capital changes.

• $350,664 increase in non-cash charges during the year ended March 31, 2024 primarily related to goodwill impairment, increased deferred income taxes and increased stock-based compensation, partially offset by lower right-of-use assets for the year ended March 31, 2024.

Investing Activities

Our primary investing activities have consisted of acquisitions of businesses, purchases of property and equipment, and capital expenditures in support of creating and enhancing our technology infrastructure. For the year ended March 31, 2024, net cash used in investing activities increased by $8,783 to $43,848. Our cash used in investing activities for the twelve months ended March 31, 2024 and March 31, 2023, was primarily comprised of capital expenditures related to internally-developed software and equity investments in strategic businesses.

Financing Activities

For the year ended March 31, 2024, net cash used in financing activities was $29,300, which was comprised of: (1) the repayment of debt obligations of $77,134, (2) payment of $3,751 for the acquisition of the remaining minority interest shareholders’ outstanding shares in one of our subsidiaries, and (3) payment of payroll withholding taxes for net share settlement of equity awards of $1,286. These cash outflows were partially offset by cash inflows comprising of proceeds from borrowings of $50,000 and stock option exercises of $2,871.

For the year ended March 31, 2023, net cash used in financing activities was $128,288, which was comprised of repayment of debt obligations of $149,000, payment of payroll withholding taxes for net share

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settlement of equity awards of $6,709, partially offset by cash inflows from proceeds from borrowings of $25,500 and stock option exercises of $2,020.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to contingencies, litigation, and goodwill and intangible assets acquired from our acquisitions. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

We generate revenue from transactions for the purchase and sale of digital advertising inventory through our various platforms and service offerings. Our revenue is based on fixed CPM, CPI, or CPA arrangements or a percentage of the ad spend through our platforms depending on the platform or service offering. We recognize revenue upon fulfillment of our performance obligation to our customers, which generally occurs at the point in time when an ad is rendered or an end consumer action, such as an app install, is completed.

ODS - Application Media

Supply - Carriers and OEMs

We enter into contracts with carriers and OEMs for our ODS segment to help the customer control, manage, and monetize the mobile device through the marketing of application slots or advertisement space/inventory to advertisers and delivering the applications or advertisements to the mobile device. The Company generally offers these services under a revenue share model. These agreements typically include the following services: the access to a SaaS platform, hosting, solution features, and general support and maintenance. The Company has concluded that each promised service is delivered concurrently, interdependently, and continuously with all other promised services over the contract term and, as such, has concluded these promises are a single performance obligation that is delivered to the customer over a series of distinct service periods over the contract term. The Company meets the criteria for overtime recognition because the customer simultaneously receives and consumes the benefits provided by the Company’s performance as the Company performs, and the same method would be used to measure progress over each distinct service period. The fees for such services are not known at contract inception, but are measurable during each distinct service period. The Company’s contracts do not include advance non-refundable fees. The Company’s fees for these services are based upon a revenue-share arrangement with the carrier or OEM. Both parties have agreed to share the revenue earned from third-party advertisers, discussed below, for these services.

Demand - Developers and Advertisers

The Company generally offers these services through CPI, CPP, and/or CPA arrangements with application developers and advertisers, generally in the form of insertion orders. The insertion orders specify the type of arrangement and additional terms such as advertising campaign budgets and timelines as well as any constraints on advertising types. These customer contracts can be open ended in regards to length of time and can renew automatically unless terminated; however, specific advertising campaigns are generally short-term in nature. Under these agreements, the Company delivers the customer’s applications to end user mobile devices, allowing for the application to be installed by the end user at their discretion. The Company gains access and control of application slots on wireless carrier and OEM mobile devices and markets those slots on their behalf to the Company’s customers.

The Company has concluded that the performance obligation within the contract is complete upon delivery

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of the application to the end user mobile device. Revenue recognition related to CPI and CPA arrangements is dependent upon an action of the end user. As a result, the transaction price is variable and is fully constrained until an install or action occurs. Revenue recognition related to CPP arrangements is dependent only upon the delivery of the application to the end user mobile device. As a result, revenue is recognized once delivery of the application has been completed as the Company’s performance obligation has been fulfilled.

ODS - Content Media

The Company generally offers programmatic advertising and targeted media content delivery services under CPM impression arrangements and page-view arrangements. Through its mobile phone first screen applications and mobile web portals, the Company markets ad space/inventory within its content products for display advertising. The ad space/inventory is allocated to the Company through arrangement with the carrier or OEM in the contracts discussed above. The Company controls this ad space/inventory and markets it on behalf of the carriers and OEMs to the advertisers. The Company’s advertising customers can bid on each individual display ad and the highest bid wins the right to fill each ad impression. Advertising agencies acting on the behalf of advertisers bid on the ad placement via the Company’s advertising exchange customers. When the bid is won, the ad will be received and placed on the mobile device by the Company. The entire process happens almost instantaneously and on a continuous basis. The advertising exchanges bill and collect from the winning bidders and provide daily and monthly reports of the activity to the Company. The Company has concluded that the performance obligation is satisfied at the point in time upon delivery of the advertisement to the device based on the impressions or page-view arrangement, as defined in the contract.

Through its mobile phone first screen applications and mobile web portals, the Company’s software platform also recommends sponsored content to mobile phone users and drives web traffic to a customer’s website. The Company markets this content to content sponsors, such as Outbrain or Taboola, similarly to the marketing of ad space/inventory. This sponsored content takes the form of articles, graphics, pictures, and similar content. The Company has concluded that the performance obligation within the contract is complete upon delivery of the content to the mobile device.

AGP - Marketplace

The Company, through its AGP segment, provides platforms that allow DSPs and publishers to buy and sell ad inventory, respectively, in a programmatic, real-time bidding (“RTB”) auction. The Company generally contracts with DSPs through an RTB Ad Exchange Agreement. It also separately contracts with publishers through an advertising insertion order or service order to provide access to its auction platform and the ad inventory available through the platform. The auction is held when ad inventory becomes available. The Company will send bid requests to various DSPs, which may choose to bid on the available ad inventory. Once a DSP wins an auction, it must deliver an ad, which is generally served through the Company’s software development kits (“SDK”). The entire auction process is nearly instantaneous. The Company bills the DSPs based on the total number of impressions and the bid price. It then remits the payment to the publishers, net of a revenue share agreed with the publisher that is generally a percentage of the DSPs’ total spending with the publisher through the platform.

AGP - Brand and Performance

The Company, through its AGP segment for its Brand and Performance offerings, contracts directly with advertisers or agencies. through insertion orders, that require the Company to fulfill advertising campaigns by identifying and purchasing targeted ad inventory and serving ads on behalf of the advertiser. The insertion orders or addendum communications provide advertising campaign details, such as campaign start and end date, target demographics, maximum budget, and rate. Rates are generally based on an end user action (CPI) or on a CPM basis. Revenue is recognized based on the rate and the number of impressions or end user actions at the time the ad is rendered or the end user action is completed.

Principal vs Agent Reporting

The determination of whether we act as a principal or as an agent in a transaction requires significant judgement and is based on our assessment of the terms of customer arrangements and the relevant accounting guidance. When we are the principal in a transaction, revenue is reported on a gross basis, which is the amount billed to DSPs, advertisers and agencies. When we are an agent in a transaction, revenue is reported net of revenue share paid to app publishers or developers.

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The Company has determined that it is a principal for its advertiser services for application media and content media when it controls the application slots or ad space/inventory. This is because it has been allocated such slots or space from the carrier or OEM and is responsible for marketing or monetizing the slots or space. The advertisers look to the Company to acquire such slots or space, and the Company’s software is used to deliver the applications, ads or content to the mobile device. The Company also may manage application or ad campaigns of advertisers associated with these services. If the applications or advertisements are not delivered to the mobile device or the Company doesn’t comply with certain policies of the advertiser, the Company would be responsible and have to indemnify the customer for these issues. The Company also has discretion in setting the price of the slots or space based on market conditions, collects the transaction prices, and remits the revenue-share percentage of the transaction price to the carrier or OEM.

The Company recognizes the transaction price received from application developers, advertisers, content providers, or websites gross and the carrier or OEM share of such transaction price as costs of revenue - revenue share - in the accompanying consolidated statements of operations and comprehensive (loss) income.

The carrier or OEM may have the right to market and sell application slots or ad space to advertisers using the Company’s software. The carrier or OEM will share revenue with the Company when it does so. The Company recognizes the revenue shared by the carrier or OEM on a net basis as the Company is not considered the primary obligor in these transactions.

The Company has determined that it is a principal for its Brand and Performance offerings as the advertisers or agencies provide parameters for their target audiences, as well as a budget for ad campaigns. Once an advertiser or advertising agency provides its specifications, the Company has the discretion to fulfill the campaign by utilizing its data and proprietary technology. The Company controls the service because it has the ultimate discretion in purchasing ad inventory; and once an ad inventory slot is purchased, filling that ad inventory slot. As a result, the Company reports the revenue billed to advertisers and agencies on a gross basis and revenue shares paid to publishers as revenue share.

The Company has determined that it is an agent in transactions on its Marketplace platforms. The Company acts as an intermediary between DSPs and publishers by providing access to a platform and the SDKs that allow both parties to transact in the buying and selling of ad inventory. The transaction price is determined through a real-time auction and the Company has no pricing discretion or obligation related to the fulfillment of the advertising delivery.

Software Development Costs

The Company applies the principles of FASB ASC 985-20, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed (“ASC 985-20”). ASC 985-20 requires that software development costs incurred in conjunction with product development be charged to research and development expense until technological feasibility is established. Thereafter, until the product is released for sale, software development costs must be capitalized and reported at the lower of the unamortized cost or net realizable value of the related product. At this time, the Company does not invest significant capital into the research and development phase of new products and features as the technological feasibility aspect of its platform products has either already been met or is met very quickly.

The Company has adopted the “tested working model” approach to establishing technological feasibility for its products. Under this approach, the Company does not consider a product in development to have passed the technological feasibility milestone until the Company has completed a model of the product that contains essentially all the functionality and features of the final product and has tested the model to ensure that it works as expected.

The Company considers the following factors in determining whether costs can be capitalized: the emerging nature of the mobile market; the gradual evolution of the wireless carrier platforms and devices for which it develops products; the lack of pre-orders or sales history for its products; the uncertainty regarding a product’s revenue-generating potential; its lack of control over the carrier distribution channel resulting in uncertainty as to when, if ever, a product will be available for sale; and its historical practice of canceling products at any stage of the development process.

After products and features are released, all product maintenance cost are expensed.

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The Company also applies the principles of FASB ASC 350-40, Accounting for the Cost of Computer Software Developed or Obtained for Internal Use (“ASC 350-40”). ASC 350-40 requires that software development costs incurred before the preliminary project stage be expensed as incurred. The Company capitalizes development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the functions intended.

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740-10, Accounting for Income Taxes (“ASC 740-10”), which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in its financial statements or tax returns. Under ASC 740-10, the Company determines deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of assets and liabilities, along with net operating losses, if it is more likely than not the tax benefits will be realized using the enacted tax rates in effect for the year in which it expects the differences to reverse. To the extent a deferred tax asset cannot be recognized, a valuation allowance is established, if necessary.

The Company is required to evaluate its ability to realize its deferred tax assets using all available evidence, both positive and negative, and determine if a valuation allowance is needed. Further, ASC 740-10-30-18 outlines the four possible sources of taxable income that may be available to realize a tax benefit for deductible temporary differences and carry-forwards. The sources of taxable income are listed below from least to most subjective:

•Future reversals of existing taxable temporary differences

•Future taxable income exclusive of reversing temporary differences and carryforwards

•Taxable income in prior carryback year(s) if carryback is permitted under the tax law

•Tax-planning strategies that would, if necessary, be implemented to, for example:

◦Accelerate taxable amounts to utilize expiring carryforwards

◦Change the character of taxable or deductible amounts from ordinary income or loss to capital gain or loss

◦Switch from tax-exempt to taxable investments

ASC 740-10 prescribes that a company should use a more-likely-than-not recognition threshold based on the technical merits of the tax position taken. Tax positions that meet the more-likely-than-not recognition threshold should be measured as the largest amount of the tax benefits, determined on a cumulative probability basis, which is more likely than not to be realized upon ultimate settlement in the financial statements. We recognize interest and penalties related to income tax matters as a component of the provision for income taxes.

The Company’s income is subject to taxation in both the U.S. and foreign jurisdictions. Significant judgment is required in evaluating the Company’s tax positions and determining its provision for income taxes. The Company establishes reserves for income tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves for tax contingencies are established when the Company believes that positions do not meet the more-likely-than-not recognition threshold. The Company adjusts uncertain tax liabilities in light of changing facts and circumstances, such as the outcome of a tax audit or lapse of a statute of limitations. The provision for income taxes includes the impact of uncertain tax liabilities and changes in liabilities that are considered appropriate.

Stock-Based Compensation

We measure and recognize compensation expense for all stock-based awards made to employees and non-employee directors based on estimated fair values on the date of grant. To determine the fair value of the stock-based awards, we use the closing price of our common stock publicly traded on the Nasdaq on the date of grant for time-based and performance-based restricted stock awards, and we utilize the Black-Scholes option pricing model to value stock options, which involves the input of subjective assumptions, including the expected volatility of our common stock, interest rates, dividend rates, and an option’s expected life. As a result, the financial statements include amounts that are based on our best estimates and judgments for the expenses recognized for stock-based compensation. The compensation expense is recognized on a straight-line basis over the requisite service or performance period. The Company may issue either new shares or treasury shares upon exercise of these awards. The Company accounts for forfeitures as they occur and records any excess tax benefits or deficiencies from equity awards in the Consolidated Statement of Operations in the reporting period for which the exercises occur. Performance-based restricted units (“PSUs”) are evaluated on a quarterly basis for probability of meeting

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performance metrics and any adjustments to share-based compensation expense are then made in the quarter of evaluation. For PSUs, we must also make assumptions regarding the likelihood of achieving performance metrics. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be materially affected.

Business Combinations

We allocate the purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. The excess of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, estimated replacement costs and future expected cash flows from acquired users, acquired technology, acquired patents, and acquired trade names from a market participant perspective. Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Allocation of purchase consideration to identifiable assets and liabilities affects Company amortization expense, as acquired finite-lived intangible assets are amortized over the useful life, whereas any indefinite lived intangible assets, including goodwill, are not amortized. During the measurement period, which is not to exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Goodwill

We evaluate goodwill for possible impairment at least annually or upon the occurrence of events or circumstances that indicate that they would more likely than not reduce the fair value of a reporting unit below its carrying amount. When the Company completes a quantitative assessment of goodwill impairment, the fair value of each reporting unit is determined and compared to the reporting unit’s carrying value. If the carrying value of a reporting unit exceeds the fair value, a goodwill impairment charge is recorded. Determining the fair value of a reporting unit required the Company to make assumptions and estimates, the most significant of which are projected future growth rates, discount rates, capital expenditures, tax rates, gross margins and terminal value. Changes in key estimates or market conditions, could result in an impairment charge. For the year ended March 31, 2024, impairment charges of $336,640 were recorded. There was no impairment charge recorded during the years ended March 31, 2023 and 2022. Refer to Note 6—Goodwill and Intangible Assets for further details.

Recently Issued Accounting Pronouncements

Recent accounting pronouncements are detailed in Note 2—Basis of Presentation and Summary of Significant Accounting Policies, to our consolidated financial statements included in Part II, Item 8 of this Annual Report.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated financial statements and the notes appearing in Item 8. Financial Statements and Supplementary Data. This section of our Annual Report generally discusses the results of our operations for the year ended March 31, 2023. compared with the year ended March 31, 2022. For a discussion of the results of our operations for the year ended March 31, 2022, compared with the year ended March 31, 2021, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report for the fiscal year ended March 31, 2022. The following discussion contains forward-looking statements that reflect our future plans, estimates, beliefs, and expected performance. The forward-looking statements are dependent upon events, risks, and uncertainties that may be outside our control. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those factors discussed below and elsewhere in this Annual Report, particularly in Item 1A—Risk Factors and the Cautionary Note Regarding Forward-Looking Statements, all of which are difficult to predict. In light of these risks, uncertainties, and assumptions, the forward-looking statements discussed may not occur. We do not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.

All U.S. dollar amounts, except share and per share amounts, in this Annual Report are in thousands.

Company Overview

Digital Turbine, Inc., through its subsidiaries (collectively “Digital Turbine” or the “Company”), is a leading independent mobile growth platform that levels up the landscape for advertisers, publishers, carriers, and device “OEMs”. We offer end-to-end products and solutions leveraging proprietary technology to all participants in the mobile application ecosystem, enabling brand discovery and advertising, user acquisition and engagement, and operational efficiency for advertisers. In addition, our products and solutions provide monetization opportunities for OEMs, carriers, and application (“app” or “apps”) publishers and developers.

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Recent Developments

Credit Agreement

On October 26, 2022, we amended the New Credit Agreement (the “Second Amendment”) to replace the London Interbank Offered Rate (“LIBOR”) with the Term Secured Overnight Financing Rate (“SOFR”). As a result, amounts outstanding under the New Credit Agreement where the applicable rate was LIBOR will accrue interest at an annual rate equal to SOFR plus between 1.50% and 2.25%. The Second Amendment made no other changes in the terms of the New Credit Agreement.

As of March 31, 2023, we had $413,134 drawn against the revolving line of credit under the New Credit Agreement. The proceeds from the borrowings were primarily used to finance past acquisitions. As of March 31, 2023, the interest rate was 6.54% and the unused line of credit fee was 0.20%, and we were in compliance with the consolidated leverage ratio, interest coverage ratio, and other covenants under the New Credit Agreement.

Segment Reporting

As of March 31, 2022, we operated through three segments, each of which was a reportable segment. The three segments were On Device Media, In-App Media - AdColony, and In-App Media-Fyber. Effective April 1, 2022, we made certain changes to our organizational and management structure that resulted in the following: (1) the renaming of the On Device Media segment to On Device Solutions and (2) the integration of IAM-A and IAM-F into a single segment called App Growth Platform. The integration of IAM-A and IAM-F was completed to drive operating efficiencies and revenue synergies. As a result of the integration of IAM-A and IAM-F, we reassessed our operating and reportable segments in accordance with ASC 280, Segment Reporting. Effective April 1, 2022, we report our results of operations through the following two segments, each of which represents an operating and reportable segment, as follows:

•ODS - We re-named the ODM segment ODS to better reflect the nature of the segment’s product offerings. This segment generates revenue from the delivery of mobile application media or content to end users. This segment provides focused solutions to all participants in the mobile application (“app”) ecosystem that want to connect with end users and consumers who hold the device, including mobile carriers and device OEMs that participate in the app economy, app publishers and developers, and brands and advertising agencies. This segment’s product offerings are enabled through relationships with mobile device carriers and OEMs.

•AGP - This segment consists of the previously reported IAM-A and IAM-F segments. AGP customers are primarily advertisers and publishers and the segment provides platforms that allow mobile app publishers and developers to monetize their monthly active users via display, native, and video advertising. The AGP platforms allow demand side platforms, advertisers, agencies, and publishers to buy and sell digital ad impressions, primarily through programmatic, real-time bidding auctions and, in some cases, through direct-bought/sold advertiser budgets. The segment also provides brand and performance advertising products to advertisers and agencies.

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

Impact of Economic Conditions and Geopolitical Developments

Our results of operations are affected by macroeconomic conditions and geopolitical developments, including but not limited to levels of business and consumer confidence, actions taken by governments to counter inflation, potential trade disputes, including but not limited to any U.S. government actions against China based app developers and publishers, and Russia’s invasion of Ukraine.

Inflation, rising interest rates, supply chain disruptions, and reduced business and consumer confidence have caused and may continue to cause a global slowdown of economic activity, which has caused and may continue to cause a decrease in demand for a broad variety of goods and services, including those provided by our clients.

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Like other advertising technology companies, we have seen a slowdown in digital advertising spending, which we believe is driven by the impact of inflation and recession fears and their potential impacts on consumers. These negative macroeconomic trends have resulted, and may continue to result in a decrease or delay of advertising budgets and spending. While the slowdown in digital advertising spending is varied and depends on the geography, advertising type, operating system, and business vertical, the current economic environment is likely to continue to impact our business, financial condition, and results of operations, the full impact of which remains uncertain at this time.

Further, various U.S. federal and state governmental agencies continue to examine the distribution and use of apps developed and/or published by China based companies. In some cases, government agencies have banned certain apps from mobile devices. Further actions by U.S. federal or state governmental agencies or other countries to restrict or ban the distribution of China based apps could negatively impact our business, financial condition, and results of operations.

While the financial impact of Russia’s invasion of Ukraine has not had a direct, material impact on our business, any European conflict, if expanded to include other countries would likely have a material, negative impact on general economic conditions and would impact our business directly.

The extent of the impact of these macroeconomic factors on our operational and financial performance is also dependent on their impact on carriers and OEMs in relation to their sales of smartphones, tablets, and other devices, as well as the impact on application developers and in-app advertisers. If negative macroeconomic factors or geopolitical developments continue to materially impact our partners over a prolonged period, our results of operations and financial condition could also be adversely impacted, the size and duration of which we cannot accurately predict at this time.

We continue to actively monitor these factors and we may take further actions that alter our business operations, as required, or that we determine are in the best interests of our employees, customers, partners, suppliers, and stockholders. In addition to monitoring the developments described above, the Company also considers the impact such factors may have on our accounting estimates and potential impairments of our non-current assets, which primarily consist of goodwill and finite-lived intangible assets.

The process of evaluating the potential impairment of goodwill is subjective and requires significant judgment, including qualitative and quantitative factors such as the identification of reporting units, identification and allocation of assets and liabilities to reporting units, and determinations of fair value. In estimating the fair value of our reporting units when performing our annual impairment test, or when an indicator of impairment is present, we make estimates and significant judgments about the future cash flows of those reporting units and other estimates including appropriate discount rates. Discount rates can fluctuate based on various economic conditions including our capital allocation and interest rates, including the interest rates on U.S. treasury bonds. Changes in judgments on these assumptions and estimates could result in goodwill impairment charges.

Finite-lived intangible assets and property, plant, and equipment are amortized or depreciated over their estimated useful lives on a straight-line basis. We monitor conditions related to these assets to determine whether events and circumstances warrant a revision to the remaining amortization or depreciation period or an impairment. We test these assets for potential impairment whenever we conclude events or changes in circumstances indicate carrying amounts may not be recoverable.

As of March 31, 2023, we considered the developments discussed above, our current operating results, and our estimates of future operating results. Please see Note 2—Basis of Presentation and Summary of Significant Accounting Policies for further information.

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RESULTS OF OPERATIONS

The following table sets forth our results of operations for the years ended March 31, 2023 and 2022 ($ in thousands):

Net revenue ($ in thousands)

Due to the reorganization and consolidation of our segments effective April 1, 2022, prior-year segment information has been retrospectively adjusted to conform to the current-year presentation. For further information on our segment reorganization and a full description of our businesses, please see Part I, Item 1, ‘Business–Our Products and Services’ in this Annual Report.

Fiscal 2023 compared to fiscal 2022

During the year ended March 31, 2023, net revenue decreased by $81,676 or 10.9% compared to the prior year. See the segment discussion below for further details regarding net revenue.

On Device Solutions

ODS revenue for the year ended March 31, 2023, decreased by $82,308 or 16.4% compared to the year ended March 31, 2022. Revenue from content media declined by approximately $77,207 primarily due to the end of a carrier partnership that resulted in lower daily active users on prepaid devices. Revenue from application media declined by approximately $5,101 due to lower new device volume in the U.S. and weakness in mobile advertising and user acquisition spending in the second half of the year ended March 31, 2023, partially offset by contract amendments with three strategic demand customers that resulted in an increase in revenue of $16,900.

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App Growth Platform

AGP revenue for the year ended March 31, 2023, decreased by $9,341 or 3.6% compared to the year ended March 31, 2022. The decrease was primarily due to a decline in brand and performance advertising of approximately $5,782 due to broader weakness in mobile advertising markets. In addition, there was a decline of approximately $3,559 due to the end of a reseller partnership in the Nordic region.

Costs of revenue and operating expenses ($ in thousands)

Fiscal 2023 compared to fiscal 2022

For the year ended March 31, 2023, total costs of revenue and operating expenses decreased by $35,600 compared to the year ended March 31, 2022. The decrease in total costs of revenue and operating expenses is primarily due to lower license fees and revenue share, which is the result of lower revenue over the same comparative periods. Costs of revenue and operating expenses included transaction costs of $4,739 for the year ended March 31, 2023, compared to $26,237 for the year ended March 31, 2022.

License fees and revenue share

License fees and revenue share include amounts paid to our carrier and OEM partners, as well as app publishers and developers through revenue sharing arrangements or via direct cost-per-thousand (“CPM”), cost-per-install (“CPI”), cost-per-placement (“CPP”), or cost-per-acquisition (“CPA”) arrangements, and are recorded as a cost of revenue. In addition, when indirect arrangements exist through advertising aggregators (ad networks) and revenue is shared with our carrier and app development partners, the shared revenue is also recorded as a cost of revenue.

License fees and revenue share decreased by $61,401 to $309,247 for the year ended March 31, 2023, and was 46.4% as a percentage of total net revenue compared to $370,648, or 49.6% of total net revenue, for the year ended March 31, 2022.

The decrease in license fees and revenue share as a percentage of total net revenue for the year ended March 31, 2023, compared to the prior year, was primarily due to revenue mix changes and the strategic demand customer contract amendments discussed above.

Other direct costs of revenue

Other direct costs of revenue are comprised primarily of hosting expenses directly related to the generation of revenue and depreciation expense associated with capitalized software costs and amortization of developed technology intangible assets

Other direct costs of revenue increased by $6,607 or 22.1% to $36,445 for the year ended March 31, 2023, and was 5.5% as a percentage of total net revenue compared to $29,838, or 4.0% of total net revenue, for the year ended March 31, 2022.

The increase in other direct costs of revenue for the year ended March 31, 2023, compared to the prior year, was due to higher hosting costs of approximately $3,392 and higher depreciation expense for developed technology assets of approximately $3,215. The increase as a percentage of total net revenue compared to the

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prior year was due to both higher costs as well as the decrease in total net revenue for the year ended March 31, 2023.

Product development

Product development expenses include the development and maintenance of the Company’s product suite and are primarily a function of personnel.

Product development expenses increased by $3,763 to $56,486 for the year ended March 31, 2023 compared to $52,723 for the year ended March 31, 2022. Product development expenses included acquisition-related costs of $1,604 and severance costs of $629 for the year ended March 31, 2023 and acquisition-related costs of $2,699 for the year ended March 31, 2022. Excluding acquisition-related costs and severance costs, product development expenses increased by $4,229 for the year ended March 31, 2023.

The increase in product development expenses was primarily due to incremental investments in the Company’s technology platforms for both legacy and acquired platforms, including approximately $7,585 of higher third-party development costs and approximately $2,490 of other operating costs, mostly for software and travel. These increases were partially offset by approximately $5,846 due to the capitalization of employee-related costs for development activities.

Sales and marketing

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

Sales and marketing expenses were relatively unchanged for the year ended March 31, 2023, decreasing by $14 to $63,295 compared to $63,309 for the year ended March 31, 2022. The decrease in sales and marketing expense was primarily due to lower employee-related costs of approximately $2,576 driven by lower headcount and incentive compensation. This decrease was partially offset by higher travel and sales-related events costs of approximately $1,393 and severance costs of approximately $1,197, primarily for Nordic region employees due to the termination of a reseller partnership in the region.

General and administrative

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

General and administrative expenses increased by $15,445 to $154,282 for the year ended March 31, 2023 compared to $138,837 for the year ended March 31, 2022. For the years ended March 31, 2023 and 2022, general and administrative expenses included acquisition-related costs of $2,496 and $23,026, respectively.

General and administrative expenses, after excluding acquisition-related costs, increased by $35,975 and was primarily due to: (1) higher depreciation expense of approximately $20,925 for developed technology assets and amortization of acquired intangible assets, (2) an increase of approximately $7,338 for employee-related costs due to higher wages and stock-based compensation costs, partially offset by lower incentive compensation, (3) an increase in bad debt expense of approximately $1,437, and (4) an increase in other categories, primarily professional services, software, and facilities of $6,275.

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Interest and other income (expense), net ($ in thousands)

Fiscal 2023 compared to fiscal 2022

Total interest and other income (expense), net, for the years ended March 31, 2023 and 2022, was approximately $24,149 and $48,269, respectively, an decrease in net expenses of $24,120.

Change in fair value of contingent consideration

For the year March 31, 2022, the Company recorded charges for changes in fair value of contingent consideration in connection with earn-outs associated with the AdColony Acquisition and Fyber Acquisition of $41,087. There were no such charges recorded for the year ended March 31, 2023, and all earn-outs related to the acquisitions of AdColony and Fyber were fully paid as of March 31, 2023.

Interest expense, net

For the years ended March 31, 2023 and 2022, the Company recorded net interest expense of $23,352 and $8,495, respectively, an increase of $14,857 or 174.9%. The increase was primarily due to an increase in interest rates of 280 basis points and higher average outstanding borrowings of $155,922 over the comparative period.

Foreign exchange transaction gain (loss)

For the years ended March 31, 2023 and 2022, the Company recorded foreign exchange transaction loss and gain of $1,026 and $2,062, respectively, and was primarily attributable to fluctuations in foreign exchange rates for trade accounts receivables and payables denominated in currencies other than the functional currency of foreign entities.

Liquidity and Capital Resources

Our primary sources of liquidity are our cash and cash equivalents, cash from operations, and borrowings under our New Credit Agreement. As of March 31, 2023, we had unrestricted cash of approximately $75,058 and $186,866 available to draw under the New Credit Agreement with BoA. We generated $113,376 in cash flows from operating activities for the year ended March 31, 2023.

Our ability to meet our debt service obligations and to fund working capital, capital expenditures, and investments in our business will depend upon our future performance, which will be subject to availability of borrowing capacity under our credit facility and our ability to access capital markets as well as financial, business, and other factors affecting our operations, many of which are beyond our control. These factors include general and regional economic, financial, competitive, legislative, regulatory, and other factors such as health epidemics including COVID-19, economic and macro-economic factors like labor shortages, supply chain disruptions, and inflation, and geopolitical developments, including the conflict in Ukraine. We cannot guarantee we will generate sufficient cash flow from operations, or that future borrowings or capital markets will be available, in an amount sufficient to enable us to pay our debt or to fund our other liquidity needs.

We believe we will generate sufficient cash flow from operations and have the liquidity and capital resources to meet our business requirements for at least 12 months from the filing date of this Annual Report.

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Outstanding Secured Indebtedness

Our outstanding secured indebtedness under the New Credit Agreement is $413,134 as of March 31, 2023. The maturity date of the New Credit Agreement is April 29, 2026, and the outstanding balance is classified as long-term debt, net of debt issuance costs of $2,612, on our consolidated balance sheets as of March 31, 2023.

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

Our credit facility also contains a maximum consolidated secured net leverage ratio and minimum consolidated interest coverage ratio. If we fail to satisfy these covenants, the lender may declare a default, which could lead to acceleration of the debt maturity. Any such default would have a material adverse effect on us.

Hosting Agreements

We enter into hosting agreements with service providers and in some cases, those agreements include minimum commitments that require us to purchase a minimum amount of service over a specified time period (“the minimum commitment period”). The minimum commitment period is generally one-year in duration and the hosting agreements include multiple minimum commitment periods. Our minimum purchase commitments under these hosting agreements total approximately $119,651 over the next four fiscal years.

Cash Flow Summary ($ in thousands)

Operating Activities

Our cash flows from operating activities are primarily driven by revenue generated from advertising activity, offset by the cash costs of operations, and are significantly influenced by the timing of and fluctuations in receipts from buyers and related payments to sellers. Our future cash flows from operating activities will be diminished if we cannot increase our revenue levels and manage costs appropriately. Cash provided by operating activities was $113,376 for the year ended March 31, 2023, compared to $84,738 for the year ended March 31, 2022. The increase of $28,638 was due to the following:

•$54,989 increase due to changes in operating assets and liabilities, primarily due to lower net working capital, driven by collection of account receivables for the year ended March 31, 2023;

•$18,699 decrease in net income; and

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•$7,652 decrease due to lower non-cash charges during the year ended March 31, 2023, including the impact of the change in fair value of contingent consideration during the year ended March 31, 2022. This impact was partially offset by accelerated amortization of trade name intangible assets amidst rebranding and a larger employee base receiving stock-based compensation for the year ended March 31, 2023.

Investing Activities

Our primary investing activities have consisted of acquisitions of businesses, purchases of property and equipment, and capital expenditures in support of creating and enhancing our technology infrastructure. For the year ended March 31, 2023, net cash used in investing activities decreased by $136,937 to approximately $35,065. Current period cash used in investing activities was comprised of capital expenditures related mostly to internally-developed software of $23,858, an equity investment of $8,499 in one of the largest independent Android app stores, and cash expenditures for business acquisitions, net of cash acquired, of $2,708 related to our acquisition of In App Video Services UK LTD. For the year ended March 31, 2022, net cash used in investing activities was approximately $172,002, comprised of cash expenditures for business acquisitions, net of cash acquired, of $148,722 related to our acquisitions of AdColony and Fyber and capital expenditures related mostly to internally-developed software of $23,280.

Financing Activities

Our financing activities consisted of borrowings and repayment of amounts borrowed under our New Credit Agreement and transactions related to our equity plans. For the year ended March 31, 2023, net cash used in financing activities was approximately $128,288, which was comprised of the repayment of debt obligations of $149,000, payment of payroll withholding taxes for net share settlement of equity awards of $6,709, and payment of debt issuance costs of $99, partially offset by proceeds from borrowings of $25,500 and stock option and warrant exercises of $2,020. For the year ended March 31, 2022, net cash provided by financing activities was approximately $185,243, which was comprised of proceeds from borrowings of $549,060 and stock option exercises of $4,300, partially offset by the payment of deferred business acquisition consideration of $302,676, repayment of debt obligations of $52,772, payment of payroll withholding taxes for net share settlement of equity awards of $8,605, and payment of debt issuance costs of $4,064.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to contingencies, litigation, and goodwill and intangible assets acquired from our acquisitions. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

We generate revenue from transactions for the purchase and sale of digital advertising inventory through our various platforms and service offerings. Our revenue is based on fixed CPM, CPI, or CPA arrangements or a percentage of the ad spend through our platforms depending on the platform or service offering. We recognize revenue upon fulfillment of our performance obligation to our customers, which generally occurs at the point in time when an ad is rendered or an end consumer action, such as an app install, is completed.

ODS - Carriers and OEMs

We enter into contracts with carriers and OEMs for our ODS segment to help the customer control, manage, and monetize the mobile device through the marketing of application slots or advertisement space/inventory to advertisers and delivering the applications or advertisements to the mobile device. The Company generally offers

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these services under a revenue share model. These agreements typically include the following services: the access to a SaaS platform, hosting, solution features, and general support and maintenance. The Company has concluded that each promised service is delivered concurrently, interdependently, and continuously with all other promised services over the contract term and, as such, has concluded these promises are a single performance obligation that is delivered to the customer over a series of distinct service periods over the contract term. The Company meets the criteria for overtime recognition because the customer simultaneously receives and consumes the benefits provided by the Company’s performance as the Company performs, and the same method would be used to measure progress over each distinct service period. The fees for such services are not known at contract inception, but are measurable during each distinct service period. The Company’s contracts do not include advance non-refundable fees. The Company’s fees for these services are based upon a revenue-share arrangement with the carrier or OEM. Both parties have agreed to share the revenue earned from third-party advertisers, discussed below, for these services.

ODS - Application Media

The Company generally offers these services through CPI, CPP, and/or CPA arrangements with application developers and advertisers, generally in the form of insertion orders. The insertion orders specify the type of arrangement and additional terms such as advertising campaign budgets and timelines as well as any constraints on advertising types. These customer contracts can be open ended in regards to length of time and can renew automatically unless terminated; however, specific advertising campaigns are generally short-term in nature. Under these agreements, the Company delivers the customer’s applications to end user mobile devices, allowing for the application to be installed by the end user at their discretion. The Company gains access and control of application slots on wireless carrier and OEM mobile devices and markets those slots on their behalf to the Company’s customers.

The Company has concluded that the performance obligation within the contract is complete upon delivery of the application to the end user mobile device. Revenue recognition related to CPI and CPA arrangements is dependent upon an action of the end user. As a result, the transaction price is variable and is fully constrained until an install or action occurs. Revenue recognition related to CPP arrangements is dependent only upon the delivery of the application to the end user mobile device. As a result, revenue is recognized once delivery of the application has been completed as the Company’s performance obligation has been fulfilled.

ODS - Content Media

The Company generally offers programmatic advertising and targeted media content delivery services under CPM impression arrangements and page-view arrangements. Through its mobile phone first screen applications and mobile web portals, the Company markets ad space/inventory within its content products for display advertising. The ad space/inventory is allocated to the Company through arrangement with the carrier or OEM in the contracts discussed above. The Company controls this ad space/inventory and markets it on behalf of the carriers and OEMs to the advertisers. The Company’s advertising customers can bid on each individual display ad and the highest bid wins the right to fill each ad impression. Advertising agencies acting on the behalf of advertisers bid on the ad placement via the Company’s advertising exchange customers. When the bid is won, the ad will be received and placed on the mobile device by the Company. The entire process happens almost instantaneously and on a continuous basis. The advertising exchanges bill and collect from the winning bidders and provide daily and monthly reports of the activity to the Company. The Company has concluded that the performance obligation is satisfied at the point in time upon delivery of the advertisement to the device based on the impressions or page-view arrangement, as defined in the contract.

Through its mobile phone first screen applications and mobile web portals, the Company’s software platform also recommends sponsored content to mobile phone users and drives web traffic to a customer’s website. The Company markets this content to content sponsors, such as Outbrain or Taboola, similarly to the marketing of ad space/inventory. This sponsored content takes the form of articles, graphics, pictures, and similar content. The Company has concluded that the performance obligation within the contract is complete upon delivery of the content to the mobile device.

AGP - Marketplace

The Company, through its AGP segment, provides platforms that allow DSPs and publishers to buy and sell ad inventory, respectively, in a programmatic, real-time bidding (“RTB”) auction. The Company generally contracts with DSPs through an RTB Ad Exchange Agreement. It also separately contracts with publishers through an

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advertising insertion order or service order to provide access to its auction platform and the ad inventory available through the platform. The auction is held when ad inventory becomes available. The Company will send bid requests to various DSPs, which may choose to bid on the available ad inventory. Once a DSP wins an auction, it must deliver an ad, which is generally served through the Company’s software development kits (“SDK”). The entire auction process is nearly instantaneous. The Company bills the DSPs based on the total number of impressions and the bid price. It then remits the payment to the publishers, net of a revenue share agreed with the publisher that is generally a percentage of the DSPs’ total spending with the publisher through the platform.

AGP - Brand and Performance

The Company, through its AGP segment for its Brand and Performance offerings, contracts directly with advertisers or agencies. through insertion orders, that require the Company to fulfill advertising campaigns by identifying and purchasing targeted ad inventory and serving ads on behalf of the advertiser. The insertion orders or addendum communications provide advertising campaign details, such as campaign start and end date, target demographics, maximum budget, and rate. Rates are generally based on an end user action (CPI) or on a CPM basis. Revenue is recognized based on the rate and the number of impressions or end user actions at the time the ad is rendered or the end user action is completed.

Principal vs Agent Reporting

The determination of whether we act as a principal or as an agent in a transaction requires significant judgement and is based on our assessment of the terms of customer arrangements and the relevant accounting guidance. When we are the principal in a transaction, revenue is reported on a gross basis, which is the amount billed to DSPs, advertisers and agencies. When we are an agent in a transaction, revenue is reported net of license fees and revenue share paid to app publishers or developers.

The Company has determined that it is a principal for its advertiser services for application media and content media when it controls the application slots or ad space/inventory. This is because it has been allocated such slots or space from the carrier or OEM and is responsible for marketing or monetizing the slots or space. The advertisers look to the Company to acquire such slots or space, and the Company’s software is used to deliver the applications, ads or content to the mobile device. The Company also may manage application or ad campaigns of advertisers associated with these services. If the applications or advertisements are not delivered to the mobile device or the Company doesn’t comply with certain policies of the advertiser, the Company would be responsible and have to indemnify the customer for these issues. The Company also has discretion in setting the price of the slots or space based on market conditions, collects the transaction prices, and remits the revenue-share percentage of the transaction price to the carrier or OEM.

The Company recognizes the transaction price received from application developers, advertisers, content providers, or websites gross and the carrier or OEM share of such transaction price as costs of revenue - license fees and revenue share - in the accompanying consolidated statements of operations and comprehensive income (loss).

The carrier or OEM may have the right to market and sell application slots or ad space to advertisers using the Company’s software. The carrier or OEM will share revenue with the Company when it does so. The Company recognizes the revenue shared by the carrier or OEM on a net basis as the Company is not considered the primary obligor in these transactions.

The Company has determined that it is a principal for its Brand and Performance offerings as the advertisers or agencies provide parameters for their target audiences, as well as a budget for ad campaigns. Once an advertiser or advertising agency provides its specifications, the Company has the discretion to fulfill the campaign by utilizing its data and proprietary technology. The Company controls the service because it has the ultimate discretion in purchasing ad inventory; and once an ad inventory slot is purchased, filling that ad inventory slot. As a result, the Company reports the revenue billed to advertisers and agencies on a gross basis and revenue shares paid to publishers as license fees and revenue share.

The Company has determined that it is an agent in transactions on its Marketplace platforms. The Company acts as an intermediary between DSPs and publishers by providing access to a platform and the SDKs that allow both parties to transact in the buying and selling of ad inventory. The transaction price is determined through a real-time auction and the Company has no pricing discretion or obligation related to the fulfillment of the advertising

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delivery.

Software Development Costs

The Company applies the principles of FASB ASC 985-20, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed (“ASC 985-20”). ASC 985-20 requires that software development costs incurred in conjunction with product development be charged to research and development expense until technological feasibility is established. Thereafter, until the product is released for sale, software development costs must be capitalized and reported at the lower of the unamortized cost or net realizable value of the related product. At this time, we do not invest significant capital into the research and development phase of new products and features as the technological feasibility aspect of our platform products has either already been met or is met very quickly.

The Company has adopted the “tested working model” approach to establishing technological feasibility for its products. Under this approach, the Company does not consider a product in development to have passed the technological feasibility milestone until the Company has completed a model of the product that contains essentially all the functionality and features of the final product and has tested the model to ensure that it works as expected.

The Company considers the following factors in determining whether costs can be capitalized: the emerging nature of the mobile market; the gradual evolution of the wireless carrier platforms and devices for which it develops products; the lack of pre-orders or sales history for its products; the uncertainty regarding a product’s revenue-generating potential; its lack of control over the carrier distribution channel resulting in uncertainty as to when, if ever, a product will be available for sale; and its historical practice of canceling products at any stage of the development process.

After products and features are released, all product maintenance cost are expensed.

The Company also applies the principles of FASB ASC 350-40, Accounting for the Cost of Computer Software Developed or Obtained for Internal Use (“ASC 350-40”). ASC 350-40 requires that software development costs incurred before the preliminary project stage be expensed as incurred. We capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed and the software will be used to perform the functions intended.

Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740-10, Accounting for Income Taxes (“ASC 740-10”), which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in its financial statements or tax returns. Under ASC 740-10, the Company determines deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of assets and liabilities, along with net operating losses, if it is more likely than not the tax benefits will be realized using the enacted tax rates in effect for the year in which it expects the differences to reverse. To the extent a deferred tax asset cannot be recognized, a valuation allowance is established, if necessary.

The Company is required to evaluate its ability to realize its deferred tax assets using all available evidence, both positive and negative, and determine if a valuation allowance is needed. Further, ASC 740-10-30-18 outlines the four possible sources of taxable income that may be available to realize a tax benefit for deductible temporary differences and carry-forwards. The sources of taxable income are listed below from least to most subjective:

•Future reversals of existing taxable temporary differences

•Future taxable income exclusive of reversing temporary differences and carryforwards

•Taxable income in prior carryback year(s) if carryback is permitted under the tax law

•Tax-planning strategies that would, if necessary, be implemented to, for example:

◦Accelerate taxable amounts to utilize expiring carryforwards

◦Change the character of taxable or deductible amounts from ordinary income or loss to capital gain or loss

◦Switch from tax-exempt to taxable investments

ASC 740-10 prescribes that a company should use a more-likely-than-not recognition threshold based on the technical merits of the tax position taken. Tax positions that meet the more-likely-than-not recognition threshold

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should be measured as the largest amount of the tax benefits, determined on a cumulative probability basis, which is more likely than not to be realized upon ultimate settlement in the financial statements. We recognize interest and penalties related to income tax matters as a component of the provision for income taxes.

The Company’s income is subject to taxation in both the U.S. and foreign jurisdictions. Significant judgment is required in evaluating the Company’s tax positions and determining its provision for income taxes. The Company establishes reserves for income tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves for tax contingencies are established when the Company believes that positions do not meet the more-likely-than-not recognition threshold. The Company adjusts uncertain tax liabilities in light of changing facts and circumstances, such as the outcome of a tax audit or lapse of a statute of limitations. The provision for income taxes includes the impact of uncertain tax liabilities and changes in liabilities that are considered appropriate.

Stock-Based Compensation

We measure and recognize compensation expense for all stock-based awards made to employees and non-employee directors based on estimated fair values on the date of grant. To determine the fair value of the stock-based awards, we use the closing price of our common stock publicly traded on the Nasdaq on the date of grant for time-based and performance-based restricted stock awards, and we utilize the Black-Scholes option pricing model to value stock options, which involves the input of subjective assumptions, including the expected volatility of our common stock, interest rates, dividend rates, and an option’s expected life. As a result, the financial statements include amounts that are based on our best estimates and judgments for the expenses recognized for stock-based compensation. The compensation expense is recognized on a straight-line basis over the requisite service or performance period. Forfeitures are recognized as occurred. Performance-based restricted units (“PSUs”) are evaluated on a quarterly basis for probability of meeting performance metrics and any adjustments to share-based compensation expense are then made in the quarter of evaluation. For PSUs, we must also make assumptions regarding the likelihood of achieving performance metrics. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be materially affected.

Business Combinations

We allocate the purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. The excess of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, estimated replacement costs and future expected cash flows from acquired users, acquired technology, acquired patents, and acquired trade names from a market participant perspective. Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Allocation of purchase consideration to identifiable assets and liabilities affects Company amortization expense, as acquired finite-lived intangible assets are amortized over the useful life, whereas any indefinite lived intangible assets, including goodwill, are not amortized. During the measurement period, which is not to exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Goodwill

We evaluate goodwill for possible impairment at least annually or upon the occurrence of events or circumstances that indicate that they would more likely than not reduce the fair value of a reporting unit below its carrying amount. When the Company completes a quantitative assessment of goodwill impairment, the fair value of each reporting unit is determined and compared to the reporting unit’s carrying value. If the carrying value of a reporting unit exceeds the fair value, a goodwill impairment charge is recorded. Determining the fair value of a reporting unit required the Company to make assumptions and estimates, the most significant of which are projected future growth rates, discount rates, capital expenditures, tax rates, gross margins and terminal value. Changes in key estimates or market conditions, could result in an impairment charge. As of March 31, 2023, 2022 and 2021, no impairment of goodwill has been identified.

Recently Issued Accounting Pronouncements

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Recent accounting pronouncements are detailed in Note 2—Basis of Presentation and Summary of Significant Accounting Policies, to our consolidated financial statements included in Part II, Item 8 of this Annual Report.

ITEM 7.    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 Annual Report on Form 10-K (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 this Report, 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 management 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 dollar amounts, except share amounts, in Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations on this Form 10-K are in thousands.

Company Overview

Digital Turbine, Inc., through its subsidiaries (collectively "Digital Turbine" or the "Company"), is a leading, independent mobile growth platform that levels up the landscape for advertisers, publishers, carriers, and device original equipment manufacturers ("OEMs"). The Company offers end-to-end products and solutions leveraging proprietary technology to all participants in the mobile application ecosystem, enabling brand discovery and advertising, user acquisition and engagement, and operational efficiency for advertisers. In addition, our products and solutions provide monetization opportunities for OEMs, carriers, and application ("app" or "apps") publishers and developers.

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Recent Developments

Credit Agreement

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

On April 29, 2021, the Company entered into an amended and restated Credit Agreement (the "New Credit Agreement”) with BoA, as a lender and administrative agent, and a syndicate of other lenders, which provides for a revolving line of credit of up to $400,000. The revolving line of credit matures on April 29, 2026 and contains an accordion feature enabling the Company to increase the total amount of the revolver by $75,000 plus an amount that would enable the Company to remain in compliance with its consolidated secured net leverage ratio, on such terms as agreed to by the parties. The New Credit Agreement contains customary covenants, representations, and events of default and also requires the Company to comply with a maximum consolidated secured net leverage ratio and minimum consolidated interest coverage ratio.

On December 29, 2021, the Company amended the New Credit Agreement (the "First Amendment"), which provides for an increase in the revolving line of credit by $125,000, which increased the maximum aggregate principal amount of the revolving line of credit to $525,000. The First Amendment made no other changes to the term or interest rates of the New Credit Agreement.

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

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

As of March 31, 2022, we had $524,134 drawn against the revolving line of credit under the New Credit Agreement. The proceeds were used to finance the acquisitions detailed below. As of March 31, 2022, we were in compliance with the consolidated leverage ratio, interest coverage ratio, and other covenants under the New Credit Agreement.

Acquisitions

The Company recently completed the acquisitions of Appreciate, AdColony Holding AS ("AdColony"), and Fyber, N.V. ("Fyber") to execute on its expressed strategy of becoming a leading end-to-end solution for mobile brand acquisition, advertising, and monetization. The following is a summary of each of those acquisitions:

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

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

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

AdColony is a leading mobile advertising platform servicing advertisers and publishers. AdColony’s proprietary video technologies and rich media formats are widely viewed as a best-in-class technology delivering third-party verified viewability rates for well-known global brands. With the addition of AdColony, the Company expanded its collective experience, reach, and suite of capabilities to benefit mobile advertisers and publishers around the globe. Performance-based spending trends by large, established brand advertisers present material upside opportunities for platforms with unique technology deployable across exclusive access to inventory.

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

The Company paid the cash consideration amounts that were due at closing and on October 26, 2021, with a combination of available cash-on-hand and borrowings under the Company’s senior credit facility. The payment made on October 26, 2021, was reduced to $98,175 due to an adjustment for the impact of accrued and unpaid taxes to the net working capital acquired. The difference between the amount due of $100,000 and amount paid resulted in an adjustment to goodwill.

On January 15, 2022, the Company paid the AdColony Acquisition earn-out consideration of $204,500 with available cash-on-hand and an additional $179,000 of borrowings under the New Credit Agreement.

The Company recognized $4,214 of costs related to the AdColony Acquisition, which were included in general and administrative expenses on the consolidated statement of operations and comprehensive income / (loss) for the year ended March 31, 2022.

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

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

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

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

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

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

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

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

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

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

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

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

As of March 31, 2022, the Company determined Fyber's net revenue for the measurement period exceeded $100,000. As a result, the Company recorded a charge of $50,000 to change in fair value of contingent consideration on the consolidated statement of operations and comprehensive income / (loss) for the fiscal year ended March 31, 2022, which was also recorded in acquisition purchase price liabilities on the consolidated balance sheet as of March 31, 2022. The Company settled the obligation through the issuance of approximately 1,200,000 shares of the Company's common stock subsequent to its fiscal year ended March 31, 2022.

Pursuant to certain German law on public takeovers, following the closing, the Company launched a public tender offer to the Minority Fyber Shareholders to acquire from them the Minority Fyber Shares. The tender offer was approved and published in July 2021, and is subject to certain minimum price rules under German law. The timing and the conditions of the tender offer, including the consideration of €0.84 per share offered to the Minority Fyber Shareholders in connection with the tender offer, was determined by the Company pursuant to the applicable Dutch and German takeover laws. During the fiscal year ended March 31, 2022, the Company purchased an additional $18,341 of Fyber's outstanding shares, resulting in an ownership percentage of Fyber of approximately 99.5% as of March 31, 2022. The Company expects to complete the purchase of the remaining outstanding Fyber shares during fiscal year 2023.

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

The Company recognized $18,698 of costs related to the Fyber Acquisition, which were included in general and administrative expenses on the consolidated statement of operations and comprehensive income / (loss) for the year ended March 31, 2022.

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Segment Reporting

Prior to the acquisitions of both AdColony and Fyber, the Company had one operating and reportable segment called Media Distribution. As a result of the acquisitions, the Company reassessed its operating and reportable segments in accordance with ASC 280, Segment Reporting. Effective April 1, 2021, the Company operates through the following three segments, each of which is a reportable segment:

•On Device Media ("ODM") - This segment is the legacy single reporting segment of Digital Turbine prior to the AdColony and Fyber acquisitions. This segment generates revenue from products and services that simplify the discovery and delivery of mobile apps and content media for device end-users. The Company provides ODM solutions to all participants in the mobile application ecosystem who want to connect with end users and consumers who hold the device, including mobile carriers and device original equipment manufacturers (“OEMs”) that participate in the app economy, app publishers and developers, and brands and advertising agencies. This segment's product offerings are enabled through relationships with mobile device carriers and OEMs.

•In App Media – AdColony ("IAM-A") - The Company's In App Media - AdColony ("IAM-A") segment provides a platform that allows mobile app publishers and developers to monetize their monthly active users via display, native, and video advertising. The IAM-A platform allows demand side platforms ("DSPs"), advertisers, agencies, and publishers to buy and sell digital ad impressions, primarily through programmatic, real-time bidding auctions and, in some cases, through direct-bought/sold advertiser budgets. IAM-A also provides brand and performance advertising services to advertisers and agencies. IAM-A customers are primarily DSPs, advertisers and agencies and relationships with app publishers are a key success factor.

•In App Media – Fyber ("IAM-F") - The Company’s In-App Media - Fyber ("IAM-F") segment consists of products and services to enable agencies, brands, and app developers to reach large audiences while achieving key performance indicators ranging from reach to frequency, cost-per-install, and return on ad spend. These campaigns are filled via in-house developed technologies and platforms customized to reach a wide array of audiences globally while being compatible with industry-recognized partners around measurement, data matching, and creative services. IAM-F customers are primarily DSPs, advertisers and agencies and relationships with app publishers are a key success factor.

Impact of COVID-19

Our results of operations are affected by economic conditions, including macroeconomic conditions, levels of business confidence, and consumer confidence. Due to the continued uncertainties associated with the COVID 19 pandemic, it is difficult to predict how our business and the demand for our service offerings will be impacted. The extent to which COVID-19 impacts our operational and financial performance will depend in part on actions taken by governments, individuals and businesses, including carriers and OEMs in relation to their sales of smartphones, tablets, and other devices, and application developers and in-app advertisers in relation to demand for advertising. If COVID-19 continues to have a significant negative impact on global economic conditions over a prolonged period of time, our results of operations and financial condition could be adversely impacted. Presently, we are conducting business as usual, with some modifications to employee travel, employee work locations, and cancellation of certain marketing events, among other modifications. We will continue to actively monitor the situation and may take further actions that alter our business operations, as required, or that we determine are in the best interests of our employees, customers, partners, suppliers, and stockholders. See the section titles "Item 1A. Risk Factors - Public health issues, such as major epidemic or pandemic, could adversely affect our business or financial results" for additional information.

RESULTS OF OPERATIONS

The following discusses the results of our operations for the year ended March 31, 2022, compared to the year ended March 31, 2021. For a discussion of the results of our operations for the year ended March 31, 2021, compared to the year ended March 31, 2020, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended March 31, 2021, filed with SEC on June 10, 2021. References to “Notes” are notes to our consolidated financial statements in “Item 8. Financial Statements and Supplementary Data.”

Net revenue ($ in thousands)

Fiscal 2022 compared to fiscal 2021

During the year ended March 31, 2022, net revenue increased by $434,017 or 138.4% compared to the prior year. The increase was due to a combination of continuing organic growth of the Company's legacy business (now the On Device Media segment) and contributions from recent acquisitions. When the Company reports revenue on a net basis, net revenue from the transaction is reported net of the license fees and revenue share expense associated with the transaction. Approximately $139,241 of our net revenue for the year ended March 31, 2022, was reported net of the associated license fees and revenue share expense.

On Device Media

The Company's ODM segment generates revenue from services that deliver mobile application media or content media to end users. This segment is the legacy reporting segment of Digital Turbine (previously called Media Distribution) and its customers are mobile device carriers and OEMs as well as advertisers. During the year ended March 31, 2022, ODM revenue increased by $189,057 or 60.3% compared to the prior year. The increase was primarily due to increased demand for our application media and content media distribution services, which led to higher revenue per available placement, as well as increased revenue from advertising partners as placement across existing commercial partners expanded, distribution with new partners expanded, and new services and features were deployed or expanded upon. Increase in application media distribution increased $150,132 as compared to the prior year, while content media distribution increased $38,925 as compared to the prior year.

In App Media - AdColony

The Company's IAM-A segment is comprised of the operations of the AdColony Acquisition and generates revenue from its platform that allows demand side platforms ("DSPs"), advertisers, agencies, and publishers to buy and sell digital ad impressions, primarily through programmatic, real-time bidding auctions and, in some cases, through direct-bought/sold advertiser budgets. IAM-A also provides brand and performance advertising services to advertisers and agencies. Total net revenue for the year ended March 31, 2022 was $169,725.

Revenue for the IAM-A segment is reported on both a gross and net (revenue, net of license fees and revenue share expense) basis. Revenue from its brand and performance services are reported on a gross basis as the Company acts as a principal in the transaction and generated net revenue of $123,094 for the year ended March 31, 2022. Revenue reported on a net basis are primarily related to the segment's platform that enables programmatic, real-time bidding for ad impressions as the Company acts as an agent in the transactions and had net revenue of $46,631 for the year ended March 31, 2022. Please see Note 3, "Acquisitions," for further information.

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In App Media - Fyber

The Company's IAM-F segment provides a platform that allows mobile app publishers and developers to monetize their monthly active users via display, native, and video advertising. The IAM-F platform allows demand side platforms ("DSPs"), advertisers, agencies, and publishers to buy and sell digital ad impressions, primarily through programmatic, real-time bidding auctions and, in some cases, through direct-bought/sold advertiser budgets. The IAM-F segment is comprised of the Fyber Acquisition and, reports revenue on a net (revenue, net of license fees and revenue share expense) basis as the Company acts as an agent in the transactions. Net revenue for the year ended March 31, 2022,were $92,611 Please see Note 3, "Acquisitions," for further information.

Costs of revenue and operating expenses ($ in thousands)

Fiscal 2022 compared to fiscal 2021

For the year ended March 31, 2022, total costs of revenue and operating expenses increased by $400,985 compared to the year ended March 31, 2021. The increase in total costs of revenue and operating expenses was a result of continuing organic growth and the acquisitions of Appreciate, AdColony, and Fyber. Costs of revenue and operating expenses included transaction costs of $26,237 for the year ended March 31, 2022, compared to $3,413 for the year ended March 31, 2021.

License fees and revenue share

License fees and revenue share include amounts paid to our carrier and OEM partners, as well as app publishers and developers who drive the revenue generated from advertising via direct cost-per-thousand ("CPM"), cost-per-install (CPI), cost-per-placement ("CPP"), or cost-per-acquisition ("CPA") arrangements, and are recorded as a cost of revenue. In addition, when indirect arrangements exist through advertising aggregators (ad networks) and revenue is shared with our carrier and app development partners, the shared revenue is also recorded as a cost of revenue.

License fees and revenue share increased by $191,999 to $370,648 for the year ended March 31, 2022, and was 49.6% as a percentage of total net revenue compared to $178,649, or 57.0% of total net revenue, for the year ended March 31, 2021.

The increase in license fees and revenue share was attributable to the increase in total net revenue over the same period as these costs are paid as a percentage of our revenue. The decrease in license fees and revenue share as a percentage of total net revenue was primarily due to our recent acquisitions, which report revenue on a net basis for certain product lines.

Other direct costs of revenue

Other direct costs of revenue are comprised primarily of hosting expenses directly related to the generation of revenue and depreciation expense accounted for under ASC 985-20, Costs of Software to be Sold, Leased, or Otherwise Marketed.

Other direct costs of revenue increased to $29,838 for the year ended March 31, 2022, and was 4.0% as a percentage of total net revenue compared to $2,358, or 0.8% of total net revenue, for the year ended March 31, 2021.

The increase in other direct costs of revenue for the year ended March 31, 2022, compared to the prior year, was primarily driven by our recent acquisitions and continued growth for the legacy On Device Media segment, both of which contributed to significant increases in hosting costs.

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Product development

Product development expenses include the development and maintenance of the Company's product suite and are primarily a function of personnel.

Product development expenses increased by $32,604 to $52,723 for the year ended March 31, 2022, and was 7.1% as a percentage of total net revenue compared to $20,119, or 6.4% of total net revenue, for the year ended March 31, 2021. For the years ended March 31, 2022 and 2021, product development expenses included acquisition-related costs of $2,699 and $92, respectively. Excluding acquisition-related costs, product development expenses as a percentage of total net revenue was relatively consistent, increasing to 6.7% for the fiscal year ended March 31, 2022, from 6.4% for fiscal year ended and March 31, 2021.

The increase in product development expenses for the year ended March 31, 2022, compared to the prior year, was primarily attributable to higher product development headcount, both organically and through our recent acquisitions, and incremental third-party development costs due to increased development activities to support revenue growth.

Sales and marketing

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

Sales and marketing expenses increased by $44,005 to $63,309 for the year ended March 31, 2022, and was 8.5% as a percentage of total net revenue compared to $19,304, or 6.2% of total net revenue, for the year ended March 31, 2021. For the year ended March 31, 2022, sales and marketing expenses included $512 of acquisition-related costs. Excluding acquisition-related costs, sales and marketing expenses as a percentage of total net revenue was 8.4% for the year ended March 31, 2022.

The increase in sales and marketing expenses for the year ended March 31, 2022, compared to the prior year, was primarily due to our recent acquisitions and additional headcount in existing markets to support the Company's continued expansion of its global footprint. The increase in sales and marketing expenses as a percentage of total net revenue was primarily due to higher-leverage sales and marketing resources, advertising and marketing campaigns, and campaign management as total net revenue grew at a higher rate.

General and administrative

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

General and administrative expenses increased by $104,897 to $138,837 for the year ended March 31, 2022, and was 18.6% as a percentage of total net revenue compared to $33,940, or 10.8% of total net revenue, for the year ended March 31, 2021. For the years ended March 31, 2022 and 2021, general and administrative expenses included acquisition-related costs of $23,026 and $3,321, respectively. Excluding acquisition-related costs, general and administrative expenses as a percentage of total net revenue was 15.5% and 9.8% for the fiscal years ended March 31, 2022 and 2021, respectively.

The increase in general and administrative expenses for the year ended March 31, 2022, compared to the prior year, was primarily due to the recent acquisitions of AdColony and Fyber. In addition, general and administrative expenses increased due to higher employee-related expenses, including stock-based compensation, primarily from higher headcount to support the Company’s growth, higher professional service costs, and an increase in amortization of intangible assets and depreciation for capitalized internal-use software due to the recent acquisitions.

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Interest and other income / (expense), net ($ in thousands)

Fiscal 2022 compared to fiscal 2021

Total interest and other income / (expense), net, for the years ended March 31, 2022 and 2021, was approximately $48,269 and $17,352, respectively, an increase in net expense of $30,917.

Change in fair value of contingent consideration

For the years ended March 31, 2022 and 2021, the Company recorded charges for changes in fair value of contingent consideration of $41,087 and $15,751, respectively. The change in fair value of contingent consideration for the fiscal year ended March 31, 2022, was due to a charge of $50,000 for the increase in the fair value of the Fyber earn-out, offset by reduction in the fair value of the AdColony earn-out of $8,913. The change in fair value of contingent consideration for the fiscal year ended March 31, 2021 related to the Mobile Posse acquisition.

Interest income / (expense), net

For the years ended March 31, 2022 and 2021, the Company recorded net interest expense of $8,495 and $1,003, respectively, an increase of $7,492 or 747.0%. The increase was primarily due to borrowings under the New Credit Agreement with BoA and interest on the loans we assumed through our acquisition of Fyber. The increase in borrowings was primarily due to the recently completed acquisitions. Interest expense also includes the amortization of debt issuance costs related to our New Credit Agreement.

Foreign exchange transaction gain

The foreign exchange transaction gain of $2,062 was primarily attributable to fluctuations in foreign exchange rates for trade accounts receivables and payables denominated in currencies other than the functional currency of foreign entities.

Liquidity and Capital Resources

Our primary sources of liquidity are cash from operations and debt. As of March 31, 2022, we had cash in total of approximately $127,162 and $866 available to draw under the New Credit Agreement with BoA. The maturity date of the New Credit Agreement is April 29, 2026, and the outstanding balance of $524,134 is classified as long-term debt, net of debt issuance costs of $3,349, on our consolidated balance sheet as of March 31, 2022.

Our ability to meet our debt service obligations and to fund working capital, capital expenditures, and investments in our business will depend upon our future performance, which will be subject to financial, business, and other factors affecting our operations, many of which are beyond our control, availability of borrowing capacity under our credit facility, and our ability to access the capital markets. For example, these factors could include general and regional economic, financial, competitive, legislative, regulatory, and other factors. We cannot ensure that we will generate cash flow from operations, or that future borrowings or the capital markets will be available, in an amount sufficient to enable us to pay our debt or to fund our other liquidity needs. We could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional indebtedness or equity capital, or restructure or refinance our indebtedness. We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow us to meet our scheduled debt service obligations.

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The Company believes it will generate sufficient cash flow from operations and has the liquidity and capital resources to meet its business requirements for at least twelve months from the filing date of this Annual Report on Form 10-K.

Outstanding Secured Indebtedness

The Company’s outstanding secured indebtedness under the New Credit Agreement is $524,134 as of March 31, 2022. See "Recent Developments - Credit Agreement" for additional information on the New Credit Agreement. The Company's ability to borrow additional amounts under its New Credit Agreement could have significant negative consequences, including:

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

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

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

•requiring additional financial covenant measurement consents or default waivers without enhanced financial performance in the short term;

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

•limiting the Company’s flexibility in planning for, or reacting to, changes in the Company’s business and the industry in which it competes, including by virtue of the requirement that the Company remain in compliance with certain negative operating covenants included in the credit arrangements under which the Company will be obligated as well as meeting certain reporting requirements; and

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

Our credit facility also contains a maximum consolidated secured net leverage ratio and minimum consolidated interest coverage ratio. There can be no assurance we will continue to satisfy these ratio covenants. If we fail to satisfy these covenants, the lender may declare a default, which could lead to acceleration of the debt maturity. Any such default would have a material adverse effect on the Company.

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

Debt Assumed Through Fyber Acquisition

As a part of the Fyber Acquisition, the Company assumed $25,789 of debt previously held by Fyber. This debt was comprised of amounts drawn against three separate revolving lines of credit. The Company settled two of the three revolving lines of credit, resulting in payments of $13,289, during the year ended March 31, 2022. Details for the remaining line of credit can be found in Note 9, "Debt," of the consolidated financial statements. The remaining revolving line of credit from Bank Leumi matures on June 15, 2022. The balance of $12,500 on this line of credit is classified as short-term debt on the consolidated balance sheet as of March 31, 2022.

Acquisition Purchase Price Liability

The Company recognized an acquisition purchase price liability of $50,000 on its consolidated balance sheet as of March 31, 2022, for the contingent earn-out consideration for the Fyber Acquisition. The Company settled the obligation through the issuance of approximately 1,200,000 shares of the Company's common stock subsequent to its fiscal year ended March 31, 2022.

Hosting Agreements

The Company enters into hosting agreements with service providers and in some cases, those agreements include minimum commitments that require the Company to purchase a minimum amount of service over a specified time period ("the minimum commitment period"). The minimum commitment period is generally one-year in duration and the hosting agreements include multiple minimum commitment periods. Our minimum purchase commitments under these hosting agreements total approximately $212,572 over the next five years.

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Cash Flow Summary ($ in thousands)

Operating Activities

Cash provided by operating activities was $84,738 for the year ended March 31, 2022, compared to $62,795 for the year ended March 31, 2021. The increase of $21,943 was due to the following:

•$117,428 increase due to higher non-cash charges, primarily for depreciation and amortization, change in fair value of contingent consideration, and stock-based compensation expense. These increases were primarily due to the impact of the AdColony and Fyber acquisitions on operating activities post-acquisition; partially offset by

•$76,170 decrease for changes in operating assets and liabilities, primarily due to higher net working capital to support the Company's growth, and the payout of compensation related to the AdColony and Fyber acquisitions and the Company's annual incentive plan; and a

•$19,315 decrease in net income.

Investing Activities

For the year ended March 31, 2022, net cash used in investing activities was approximately $172,002, comprised of cash expenditures for business acquisitions, net of cash acquired, of $148,722 and capital expenditures related mostly to internally-developed software of $23,280. For the year ended March 31, 2021, net cash used in investing activities was approximately $37,808, comprised of cash expenditures for business acquisitions, net of cash acquired, of $28,604 and capital expenditures related mostly to internally-developed software of $9,204. The $120,118 increase in cash expenditures for business acquisitions was due to our acquisitions of AdColony and Fyber during the year ended March 31, 2022, as compared to our acquisition of Mobile Posse, Inc., during the year ended March 31, 2021. The $14,076 increase in capital expenditures was due to a combination of continued investments in product development for our legacy ODM business as well as development activities at our AdColony and Fyber Acquisitions.

Financing Activities

For the year ended March 31, 2022, net cash provided by financing activities was approximately $185,243, comprised of proceeds from borrowings of $549,060 primarily used for the acquisitions of AdColony and Fyber, and options exercised of $4,300, partially offset by payment of deferred business acquisition consideration of $302,676, repayment of debt obligations of $52,772, payment of withholding taxes for net share settlement of equity awards of $8,605, and payment of debt issuance costs of $4,064. For the year ended March 31, 2021, net cash used in financing activities was approximately $15,216, comprised of payment of contingent consideration of $16,956 related to the Mobile Posse acquisition and repayment of debt obligations of $20,000, offset by proceeds from borrowings of $15,000 and proceeds from the exercise of stock options of $7,209.

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Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to contingencies, litigation, and goodwill and intangible assets acquired from our acquisitions. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

We generate revenue from transactions for the purchase and sale of digital advertising inventory through our various platforms and service offerings. Generally, our revenue is based on a percentage of the ad spend through our platforms, although for certain service offerings, we receive a fixed cost-per-thousand ("CPM") or cost-per-install ("CPI") for ad impressions sold or app installs completed. We recognize revenue upon fulfillment of our performance obligation to our customers, which generally occurs at the point in time when an ad is rendered or an end consumer action, such as an app install, is completed.

ODM - Carriers and OEMs

We enter contracts with carriers and OEMs for our ODM segment to help the customer control, manage, and monetize the mobile device through the marketing of application slots or advertisement space/inventory to advertisers and delivering the applications or advertisements to the mobile device. The Company generally offers these services under a revenue share model or, to a lesser extent, a customer contract per-device license fee model for a two-to-four-year software as a service ("SaaS") license agreement. These agreements typically include the following services: the access to a SaaS platform, hosting, solution features, and general support and maintenance. The Company has concluded that each promised service is delivered concurrently, interdependently, and continuously with all other promised services over the contract term and, as such, has concluded these promises are a single performance obligation that is delivered to the customer over a series of distinct service periods over the contract term. The Company meets the criteria for overtime recognition because the customer simultaneously receives and consumes the benefits provided by the Company's performance as the Company performs, and the same method would be used to measure progress over each distinct service period. The fees for such services are not known at contract inception but are measurable during each distinct service period. The Company's contracts do not include advance non-refundable fees. The Company’s fees for these services are based upon a revenue-share arrangement with the carrier or OEM. Both parties have agreed to share the revenue earned from third-party advertisers, discussed below, for these services.

ODM - Third-Party Advertisers

The Company generally offers these services through cost-per-install ("CPI"), cost-per-placement ("CPP"), and/or cost-per-action ("CPA") arrangements with third-party advertisers, developers, agencies, and advertising aggregators, generally in the form of insertion orders. The insertion orders specify the type of arrangement and additional terms such as advertising campaign budgets and timelines as well as any constraints on advertising types. These customer contracts can be open ended with regard to length of time and can renew automatically unless terminated; however, specific advertising campaigns are generally short-term in nature. These agreements typically include the delivery of applications to home screens of mobile devices. Access to inventory of application slots is allocated by carriers or OEMs in the contracts identified above. The Company controls these application slots and markets it on behalf of the carriers and OEMs to the advertisers. The Company has concluded that the performance obligation within the contract is complete upon delivery of the application to the device. Revenue recognition related to CPI and CPA arrangements is dependent upon an action of the end user. As a result, the transaction price is variable and is fully constrained until an install or action occurs.

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ODM - Programmatic Advertising and Targeted Media Delivery

The Company generally offers these services under CPM impression arrangements and page-view arrangements. Through its mobile phone first screen applications and mobile web portals, the Company markets ad space/inventory within its content products for display advertising. The ad space/inventory is allocated to the Company through arrangement with the carrier or OEM in the contracts discussed above. The Company controls this ad space/inventory and markets it on behalf of the carriers and OEMs to the advertisers. The Company’s advertising customers can bid on each individual display ad and the highest bid wins the right to fill each ad impression. Advertising agencies acting on the behalf of advertisers bid on the ad placement via the Company’s advertising exchange customers. When the bid is won, the ad will be received and placed on the mobile device by the Company. The entire process happens almost instantaneously and on a continuous basis. The advertising exchanges bill and collect from the winning bidders and provide daily and monthly reports of the activity to the Company. The Company has concluded that the performance obligation is satisfied at the point in time upon delivery of the advertisement to the device based on the impressions or page-view arrangement, as defined in the contract.

Through its mobile phone first screen applications and mobile web portals, the Company’s software platform also recommends sponsored content to mobile phone users and drives web traffic to a customer's website. The Company markets this content to content sponsors, such as Outbrain or Taboola, similarly to the marketing of ad space/inventory. This sponsored content takes the form of articles, graphics, pictures, and similar content. The Company has concluded that the performance obligation within the contract is complete upon delivery of the content to the mobile device.

IAM-A and IAM-F - Marketplace

The Company, through its IAM-A and IAM-F segments, provides platforms that allow demand-side platforms (“DSPs”) and publishers to buy and sell ad inventory, respectively, in a programmatic, real-time bidding ("RTB") auction. The Company generally contracts with DSPs through an RTB Ad Exchange Agreement (“Exchange Agreement”). It also separately contracts with publishers through an advertising insertion order or service order to provide access to its auction platform and the ad inventory available through the platform. The auction is held when ad inventory becomes available. The Company will send bid requests to various DSPs, which may choose to bid on the available ad inventory. Once a DSP wins an auction, it must deliver an ad, which is generally served through the Company's software development kits (“SDK”). The entire auction process is nearly instantaneous. The Company bills the DSPs based on the total number of impressions and the bid price. It then remits the payment to the publishers, net of a revenue share agreed with the publisher that is generally a percentage of the DSPs’ total spending with the publisher through the platform.

IAM-A - Brand and Performance

The Company, through its IAM-A segment for its Brand and Performance offerings, contracts directly with advertisers or agencies. through insertion orders, that require the Company to fulfill advertising campaigns by identifying and purchasing targeted ad inventory and serving ads on behalf of the advertiser. The insertion orders or addendum communications provide advertising campaign details, such as campaign start and end date, target demographics, maximum budget, and rate. Rates are generally based on an end user action (CPI) or on a CPM basis. Revenue is recognized based on the rate and the number of impressions or end user actions at the time the ad is rendered, or when the end user action is completed.

Principal vs Agent Reporting

The determination of whether we act as a principal or as an agent in a transaction requires significant judgement and is based on our assessment of the terms of customer arrangements and the relevant accounting guidance. When we are the principal in a transaction, revenue is reported on a gross basis, which is the amount billed to DSPs, advertisers, and agencies. When we are an agent in a transaction, revenue is reported net of license fees and revenue share paid to app publishers or developers.

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The Company has determined that it is a principal for its advertiser services for application management and programmatic advertising and targeted media delivery when it controls the application slots or ad space/inventory. This is because it has been allocated such slots or space from the carrier or OEM and is responsible for marketing or monetizing the slots or space. The advertisers look to the Company to acquire such slots or space, and the Company’s software is used to deliver the applications, ads or content to the mobile device. The Company also may manage application or ad campaigns of advertisers associated with these services. If the applications or advertisements are not delivered to the mobile device or the Company doesn’t comply with certain policies of the advertiser, the Company would be responsible and would have to indemnify the customer for these issues. The Company also has discretion in setting the price of the slots or space based on market conditions, collects the transaction prices, and remits the revenue-share percentage of the transaction price to the carrier or OEM.

The Company recognizes the transaction price received from advertisers, content providers, or websites gross and the carrier or OEM share of such transaction price as costs of revenue - license fees and revenue share - in the accompanying consolidated statements of operations and comprehensive income / (loss).

The carrier or OEM may have the right to market and sell application slots or ad space to advertisers using the Company’s software. The carrier or OEM will share revenue with the Company when it does so. The Company recognizes the revenue shared by the carrier or OEM on a net basis as the Company is not considered the primary obligor in these transactions.

The Company has determined that it is a principal for its Brand and Performance offerings as the advertisers or agencies provide parameters for their target audiences, as well as a budget for ad campaigns. Once an advertiser or advertising agency provides its specifications, the Company has the discretion to fulfill the campaign by utilizing its data and proprietary technology. The Company controls the service because it has the ultimate discretion in purchasing ad inventory; and once an ad inventory slot is purchased, filling that ad inventory slot. As a result, the Company reports the revenue billed to advertisers and agencies on a gross basis and revenue shares paid to publishers as license fees and revenue share.

The Company has determined that it is an agent in transactions on its Marketplace platforms. The Company acts as an intermediary between DSPs and publishers by providing access to a platform and the SDKs that allow both parties to transact in the buying and selling of ad inventory. The transaction price is determined through a real-time auction and the Company has no pricing discretion or obligation related to the fulfillment of the advertising delivery.

Software Development Costs

The Company applies the principles of FASB ASC 985-20, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed (“ASC 985-20”). ASC 985-20 requires that software development costs incurred in conjunction with product development be charged to research and development expense until technological feasibility is established. Thereafter, until the product is released for sale, software development costs must be capitalized and reported at the lower of the unamortized cost or net realizable value of the related product. At this time, we do not invest significant capital into the research and development phase of new products and features as the technological feasibility aspect of our platform products has either already been met or is met very quickly.

The Company has adopted the “tested working model” approach to establish technological feasibility for its products. Under this approach, the Company does not consider a product in development to have passed the technological feasibility milestone until the Company has completed a model of the product that contains essentially all the functionality and features of the final product and has tested the model to ensure that it works as expected.

The Company considers the following factors in determining whether costs can be capitalized: the emerging nature of the mobile market; the gradual evolution of the wireless carrier platforms and devices for which it develops products; the lack of pre-orders or sales history for its products; the uncertainty regarding a product’s revenue-generating potential; its lack of control over the carrier distribution channel resulting in uncertainty as to when, if ever, a product will be available for sale; and its historical practice of canceling products at any stage of the development process.

After products and features are released, all product maintenance costs are expensed.

The Company also applies the principles of FASB ASC 350-40, Accounting for the Cost of Computer Software Developed or Obtained for Internal Use (“ASC 350-40”). ASC 350-40 requires that software development costs incurred before the preliminary project stage be expensed as incurred. We capitalize development costs related to these software applications once the preliminary project stage is complete and it is probable that the project will be completed, and the software will be used to perform the functions intended.

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Income Taxes

The Company accounts for income taxes in accordance with FASB ASC 740-10, Accounting for Income Taxes (“ASC 740-10”), which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in its financial statements or tax returns. Under ASC 740-10, the Company determines deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of assets and liabilities, along with net operating losses, if it is more likely than not the tax benefits will be realized using the enacted tax rates in effect for the year in which it expects the differences to reverse. To the extent a deferred tax asset cannot be recognized, a valuation allowance is established, if necessary.

The Company is required to evaluate its ability to realize its deferred tax assets using all available evidence, both positive and negative, and determine if a valuation allowance is needed. Further, ASC 740-10-30-18 outlines the four possible sources of taxable income that may be available to realize a tax benefit for deductible temporary differences and carry-forwards. The sources of taxable income are listed below from least to most subjective:

•Future reversals of existing taxable temporary differences

•Future taxable income exclusive of reversing temporary differences and carryforwards

•Taxable income in prior carryback year(s) if carryback is permitted under the tax law

•Tax-planning strategies that would, if necessary, be implemented to, for example:

◦Accelerate taxable amounts to utilize expiring carryforwards

◦Change the character of taxable or deductible amounts from ordinary income or loss to capital gain or loss

◦Switch from tax-exempt to taxable investments

ASC 740-10 prescribes that a company should use a more-likely-than-not recognition threshold based on the technical merits of the tax position taken. Tax positions that meet the more-likely-than-not recognition threshold should be measured as the largest amount of the tax benefits, determined on a cumulative probability basis, which is more likely than not to be realized upon ultimate settlement in the financial statements. We recognize interest and penalties related to income tax matters as a component of the provision for income taxes.

The Company’s income is subject to taxation in both the United States and foreign jurisdictions. Significant judgment is required in evaluating the Company’s tax positions and determining its provision for income taxes. The Company establishes reserves for income tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves for tax contingencies are established when the Company believes that positions do not meet the more-likely-than-not recognition threshold. The Company adjusts uncertain tax liabilities in light of changing facts and circumstances, such as the outcome of a tax audit or lapse of a statute of limitations. The provision for income taxes includes the impact of uncertain tax liabilities and changes in liabilities that are considered appropriate.

Stock-Based Compensation

We have applied FASB ASC 718, Share-Based Payment (“ASC 718”), and, accordingly, we record stock-based compensation expense for all our stock-based awards.

Under ASC 718, we estimate the fair value of stock options granted using the Black-Scholes model. The fair value for awards that are expected to vest is amortized on a straight-line basis over the requisite service period of the award, which is generally the option vesting term. The amount of expense recognized represents the expense associated with the stock options we expect to vest, based on an estimated rate of forfeitures. This rate of forfeitures is updated, as necessary, and any adjustments needed to recognize the fair value of options that vest or are forfeited are recorded.

The Black-Scholes model, used to estimate the fair value of an award, requires the input of subjective assumptions, including the expected volatility of our common stock, interest rates, dividend rates, and an option’s expected life. As a result, the financial statements include amounts that are based on our best estimates and judgments for the expenses recognized for stock-based compensation.

The Company grants restricted stock units ("RSUs") subject to performance conditions that vest based on the satisfaction of the conditions of the award. The fair value of performance-based awards is determined using the market closing price on the grant date as well as the Company's judgment of likely future performance, which impacts the total number of RSUs that will be issued to the employees.

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Business Combinations

We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, estimated replacement costs and future expected cash flows from acquired users, acquired technology, acquired patents, and acquired trade names from a market participant perspective. Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. Allocation of purchase consideration to identifiable assets and liabilities affects Company amortization expense, as acquired finite-lived intangible assets are amortized over the useful life, whereas any indefinite lived intangible assets, including goodwill, are not amortized. During the measurement period, which is not to exceed one year from the acquisition date, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Goodwill and Indefinite-Lived Intangible Assets

Goodwill represents the excess of acquisition cost over fair value of net assets of businesses acquired. In accordance with FASB ASC 350-20, Goodwill and Other Intangible Assets, the values assigned to goodwill and indefinite-lived intangible assets are not amortized to expense, but rather they are evaluated, at least on an annual basis, to determine if there are potential impairments.

For goodwill and indefinite-lived intangible assets, we complete what is referred to as the “Step 0” analysis, which involves evaluating qualitative factors including macroeconomic conditions, industry and market considerations, cost factors, and overall financial performance. If our “Step 0” analysis indicates it is more likely than not the fair value is less than the carrying amount, we would perform a quantitative two-step impairment test.

The quantitative analysis compares the fair value of our reporting unit or indefinite-lived intangible assets to their carrying amounts and an impairment loss is recognized equivalent to the excess of the carrying amount over the fair value. Fair value is determined based on discounted cash flows, market multiples, or appraised values, as appropriate. Discounted cash flow analysis requires assumptions about the timing and amount of future cash inflows and outflows, risk, the cost of capital, and terminal values. Each of these factors can significantly affect the value of the intangible asset. The estimates of future cash flows, based on reasonable and supportable assumptions and projections, require management’s judgment.

Any changes in key assumptions about the Company’s businesses and their prospects, or changes in market conditions, could result in an impairment charge. Some of the more significant estimates and assumptions inherent in the intangible asset valuation process include: the timing and amount of projected future cash flows; the discount rate selected to measure the risks inherent in the future cash flows; and the assessment of the asset’s life cycle and the competitive trends impacting the asset, including consideration of any technical, legal or regulatory trends.

In the years ended March 31, 2022 and 2021, the Company determined there were no indicators of impairment of goodwill. See Note 5, "Goodwill and Intangible Assets," to the Company's consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K. In performing the related valuation analyses, the Company used various valuation methodologies including probability-weighted discounted cash flows, comparable transaction analysis, and market capitalization and comparable company multiple comparison.

Recently Issued Accounting Pronouncements

Recent accounting pronouncements are detailed in Note 2, "Basis of Presentation and Summary of Significant Accounting Policies," to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K.