Digital Turbine, Inc. (APPS)

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

The following discussion should be read in conjunction with, and is qualified in its entirety by, the condensed consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q (this “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 (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements involve substantial risks and uncertainties. When used in this Report, the words “anticipate,” “believe,” “estimate,” “expect,” “will,” “seek,” “should,” “could,” “can,” “would,” “may,” “might,” “intend,” “plan,” “target,” “project,” “contemplate,” “predict,” “suggest,” “potential,” and “continue” and the negative of these words and other similar expressions, as they relate to our management or us, are intended to identify such forward-looking statements. Our actual results, performance, or achievements could differ materially from those expressed in or implied by these forward-looking statements as a result of a variety of factors, including those set forth under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2026, as well as those described elsewhere in this Report and in our other public filings. The risks included are not exhaustive and additional factors could adversely affect our business and financial performance. We operate in a very competitive and rapidly changing environment. New risk factors emerge from time-to-time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Historical operating results are not necessarily indicative of the trends in operating results for any future period. We do not undertake any obligation to update any forward-looking statements made in this Report. Accordingly, investors should use caution in relying on past forward-looking statements, which are estimates based on assumptions, known historical results and trends at the time they are made, to anticipate future results or trends. This Report and all subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

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

Company Overview

Digital Turbine, Inc., through its subsidiaries (collectively “Digital Turbine” or the “Company,” “we,” or “us”), is a leading independent mobile growth platform that levels up the landscape for advertisers, publishers, carriers, and device original equipment manufacturers (“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.

Recent Developments for the Three Months Ended June 30, 2026

The Company announced a strategic partnership with Orange, one of the world's leading telecommunications operators, serving 340 million customers across 26 countries in the EMEA region. Through this partnership, Digital Turbine will bring its alternative app distribution platform and its SingleTap technology to Orange subscribers during the latter half of this fiscal year.

The Company announced Artificial Intelligence (“AI”)-focused collaborations with Google Cloud and Databricks. Through the integration of Databricks Genie Spaces and Databricks Apps into its technology stack, the Company is accelerating its data and AI strategy to enable smarter and privacy-conscious mobile experiences at a global scale. The Company is embedding AI directly into the core intelligence systems powering its platform to improve targeting, recommendations, and real-time optimization across apps, devices, and on-device surfaces.

The Company named Benneaser John as its Chief Technology Officer on April 6, 2026. Mr. John brings extensive AI and enterprise technology leadership experience to the Company.

The Company entered into an agreement with a third-party to sell its dormant exchange (the “Exchange”), originally acquired in connection with the AdColony acquisition in 2021, for total cash consideration of $4,700. The Company will recognize the gain in the second quarter of fiscal 2027 and has used the proceeds to pay down a portion of its outstanding debt.

As a result of achieving certain leverage ratio thresholds under its Financing Agreement, the applicable

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margin of the Company’s most significant loan tranche was reduced by 50 basis points.

Amendment to Financing Agreement

On April 20, 2026, the Company amended its Financing Agreement. The amendment reduced the liquidity covenant requirement for the period between April 1, 2026 and December 31, 2026 from $20,000 to $15,000 and modified the timing and amount of its exit and duration fees. The Company (i) paid a $5,000 amendment fee, capitalized as original debt discount to be amortized over the remaining term of the Financing Agreement; (ii) limited its remaining exit fees to $1,350; and (iii) limited future duration fees to $5,000, payable in cash, which will be waived if the Company prepays the principal of a certain tranche of the outstanding term loan by December 31, 2026. The exit fees were added to the outstanding principal balance on the Amendment Date.

Impact of Economic Conditions and Geopolitical Developments

The Company, as a global company, is subject to negative impacts and risks related to prevailing macroeconomic conditions and significant events with macroeconomic impacts, including, but not limited to, the wars in Ukraine, Israel, Gaza, Iran, Lebanon and Syria, geopolitical tensions involving China including but not limited to various U.S. federal and state governmental agencies continued examination of the distribution and use of apps developed and/or published by China-based companies, market conditions related to inflation, recessionary concerns, fluctuating foreign currency exchange rates, increases in trade tariffs, changes in interest rates, uncertainty over liquidity concerns in the broader financial services industry, supply chain, including the continued global memory chip shortage associated with high AI demand, and energy market disruption issues. As a result of these macroeconomic conditions and uncertainties, certain of our customers have, and others may, defer or reduce their use of our services, which has had, and could in the future have, a negative impact on our net revenues. We have suspended our business activities in Russia and Belarus to the extent required by applicable law, but such suspension has not had, and we do not expect it to have, a material impact on our financial results. Despite our significant presence in the region, we do not expect the ongoing conflicts in Iran, Israel, Gaza, Lebanon, and Syria to have a material impact on our operations or our financial results. In addition, our borrowings outstanding under our Financing Agreement currently bear interest at variable rates and may continue to fluctuate as a result of changes in interest rates. We continuously monitor the direct and indirect impacts of these events on our business and financial results, as well as the overall global economy, and we anticipate that these macroeconomic events could continue to negatively impact our results of operation.

See Part I, Item 1A, “Risk Factors,” in its Annual Report on Form 10-K for the fiscal year ended March 31, 2026, filed with the Securities and Exchange Commission on May 26, 2026, for additional information related to risks associated with macroeconomic challenges.

Components of Results of Operations

Net Revenue

The Company generates 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 cost-per-thousand (“CPM”), cost-per-install (“CPI”), or cost-per-acquisition (“CPA”) arrangements or a percentage of the ad spend through our platforms. The Company recognizes 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.

Cost of Revenue and Operating Expenses

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 CPM, CPI, CPA, or cost-per-placement (“CPP”) 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.

Other direct costs of revenue are comprised primarily of hosting expenses directly related to the generation of revenue and bidding and platform fees associated with the Company’s exchange platform.

Product development expenses include the development and maintenance of the Company’s product suite and are primarily a function of employee-related costs, which include salaries, incentive compensation, and benefits as well as professional services fees, hosting expenses, and software costs. The Company capitalizes certain product development costs related to developing new functionality for our products, which may cause our product

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development expense to fluctuate from period to period.

Sales and marketing expenses represent the costs of sales and marketing personnel, which include salaries, incentive compensation, and benefits in addition to advertising, marketing campaigns and campaign management, professional services fees, travel, and software costs. The Company capitalizes certain sales and marketing costs related to developing new functionality for our products, which may cause our sales and marketing expense to fluctuate from period to period.

General and administrative expenses consist primarily of costs incurred to support our business operations across the parent and subsidiary companies, and include employee-related expenses such as salaries, incentive compensation and benefits for employees engaged in finance, accounting, legal, human resources and administration as well as other costs such as professional services and consulting fees, software costs, travel, facilities costs, insurance, stock-based compensation, and depreciation and amortization expense.

Interest and other income (expense), net

Interest expense, net consists of interest paid and accrued on our debt and amortization of debt discount, debt issuance costs, and exit and duration fees, offset by interest income earned on our cash and cash equivalents. Since the borrowings outstanding under our credit agreement currently bear interest at variable rates, we expect our interest expense may continue to fluctuate as a result of changes in interest rates.

Unrealized gain (loss) on derivatives represents the fair value re-measurement of the 2025 Warrants at each balance sheet date and is heavily dependent on the price of our common stock at each reporting period. These remeasurements will continue until the 2025 Warrants are exercised or expire.

Foreig

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RESULTS OF OPERATIONS

The following table sets forth our results of operations for the years ended March 31, 2026 and 2025:

Comparison of Our Results of Operations for the Year Ended March 31, 2026 to March 31, 2025:

Net Revenue

Net revenue increased by $74,745 or 15.2% during the year ended March 31, 2026 compared to the prior year.

On Device Solutions

On Device Solutions (“ODS”) net revenue for the year ended March 31, 2026, increased by $40,797 or 11.9% compared to the year ended March 31, 2025 and was primarily driven by improved performance in the Asia Pacific and China regions. Revenue from application media increased by approximately $38,307 primarily due to higher device volumes internationally and an increase in revenue-per-device in the U.S. and internationally, offset by lower device volumes in the U.S. Net revenue from content media increased by approximately $2,490 primarily due

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to an increase in activity with a carrier that resulted in higher daily active users on prepaid devices.

App Growth Platform

App Growth Platform (“AGP”) net revenue for the year ended March 31, 2026, increased by $32,513 or 21.2% compared to the year ended March 31, 2025 and was primarily driven by improved performance in the Asia Pacific and China regions. Advertising exchange revenues increased $36,607, which was largely due to the continued onboarding of new publishers and demand partners. Performance and brand advertising revenue declined by approximately $2,826, primarily due to reduced demand in major brands. Net revenues from reseller partnerships decreased by $1,268, between the comparable periods.

Costs of Revenue and Operating Expenses

Revenue share

Revenue share increased by $8,351 or 3.5% to $243,638 for the year ended March 31, 2026, and was 43.1% as a percentage of total net revenue compared to $235,287, or 48.0% of total net revenue, for the year ended March 31, 2025. The increase in revenue share coincides with the increase in total net revenue over the same periods, as these costs are typically paid as a percentage of our revenue. The decrease in revenue share as a percentage of total net revenue was primarily driven by product mix changes, including certain high-margin product lines driving a higher percentage of total net revenue between the comparative periods and the absence in the year ended March 31, 2026 of a non-recurring contract-related cost of $3,800 that was included in the year ended March 31, 2025.

Other direct costs of revenue

Other direct costs of revenue increased by $12,430 or 36.0% to $46,971 for the year ended March 31, 2026, and was 8.3% as a percentage of total net revenue compared to $34,541, or 7.0% of total net revenue, for the year ended March 31, 2025. The increase in other direct costs of revenue for the year ended March 31, 2026, compared to the prior year, was primarily driven by favorable monetization methodology changes implemented to the exchange. This change, while driving an increase in bidding and platform fees, also increased revenue, which resulted in a higher margin for the exchange platform. The increase was further driven by the achievement of higher revenue targets in the current year. The increase in other direct costs as a percentage of total net revenue was primarily due to the monetization methodology changes.

Product development

Product development expenses increased by $1,012 or 2.6% to $40,476 for the year ended March 31, 2026 compared to $39,464 for the year ended March 31, 2025. The increase in product development expenses was primarily due to higher employee-related costs, primarily cash incentive compensation, of $3,818 and hosting and software costs of $1,192. These increases were partially offset by decreases in professional service fees of $2,792, severance of $223, and travel and entertainment costs of $144. Additionally, the Company had a $694 increase in capitalized labor and third-party costs related to internally developed software during the year ended March 31, 2026 which served to reduce product development expenses as compared to the year ended March 31, 2025.

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Sales and marketing

Sales and marketing expenses decreased by $3,642 or 5.9% to $58,000 for the year ended March 31, 2026 compared to $61,642 for the year ended March 31, 2025. The decrease in sales and marketing expense was primarily due to higher offsetting capitalization of labor costs related to internally developed software of approximately $2,433 and decreases in severance costs of $1,428 and events and lead generation costs of $877. These decreases were partially offset by higher professional service fees of $749 and employee-related costs of $674, which include a decrease in headcount offset by an increase in incentive compensation expense.

General and administrative

General and administrative expenses decreased by $31,523 or 18.2% to $142,124 for the year ended March 31, 2026 compared to $173,647 for the year ended March 31, 2025. The decrease was primarily due to decreases in stock-based compensation of $17,056 and depreciation and amortization expense of $11,226 primarily related to certain intangible assets that became fully amortized between the comparative periods. Additionally, the Company had lower credit loss expense of $2,534, facilities costs of $2,102, business transformation costs of $2,029, severance costs of $1,427, supplies and other costs of $685, and software costs of $504 as compared to the year ended March 31, 2025. These decreases were partially offset by higher employee-related costs of $4,559, primarily cash incentive compensation, and higher professional services and consulting fees of $1,937.

Interest and Other Income (Expense), Net

Change in fair value of contingent consideration

The change in fair value of contingent consideration decreased $69 or 23.0% to $231 for the year ended March 31, 2026 compared to $300 for the year ended March 31, 2025 as a result of the earn out period associated with the Company’s acquisition of In App Video Services UK LTD being completed as of December 31, 2025.

Interest expense, net

For the years ended March 31, 2026 and 2025, the Company recorded net interest expense of $58,580 and $34,783, respectively, an increase of $23,797 or 68.4%. The increase was primarily due to higher applicable margins on our outstanding debt under the Financing Agreement as compared to the Revolver, which was refinanced on August 29, 2025, and higher amortization of debt discount, issuance costs and exit and duration fees associated with the Financing Agreement. The weighted-average interest rate on our debt during the year ended March 31, 2026 was 11.3% compared to 8.4% for the year ended March 31, 2025. The Company also made total payments of $55,000 on the principal of the term loans during the year ended March 31, 2026, at which time a pro rata portion of the original issue discount and debt issuance costs associated with the Financing Agreement in the amount of $3,205 were accelerated and fully amortized. See Note 12—Debt in the notes to the consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K for additional information regarding the Financing Agreement.

Unrealized gain on derivatives

For the year ended March 31, 2026, the Company recognized unrealized gains on derivatives of $1,504. There was no comparable amount for the year ended March 31, 2025. The increase was due to the issuance of the

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2025 Warrants in connection with the Company’s Financing Agreement. The Company classified these warrant instruments as derivative liabilities at fair value and adjusted the instruments to fair value at each reporting period.

Foreign exchange transaction gain

For the years ended March 31, 2026 and 2025, the Company recorded foreign exchange transaction gains of $3,536 and $1,297, respectively, and was primarily attributable to fluctuations in foreign exchange rates for trade accounts receivable and payables denominated in currencies other than the functional currency of foreign entities.

Loss on extinguishment of debt

For the year ended March 31, 2026, the Company recorded a loss on exting

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