# Digital Turbine, Inc.: Form 10-Q for the period ended Jun 30, 2024

- Company: [Digital Turbine, Inc.](/companies/apps.md) (CIK 317788)
- Form: 10-Q
- Filed: 2024-08-07
- Accepted by EDGAR: Aug 7, 2024, 16:54 ET
- Period: 2024-06-30
- Accession: 0001628280-24-035686
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/317788/000162828024035686/apps-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/317788/000162828024035686/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $118.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-04-01 to 2024-06-30 | $55.8m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2024-04-01 to 2024-06-30 | $62.2m | us-gaap:GrossProfit |
| Research and development | 3 months, 2024-04-01 to 2024-06-30 | $10.7m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | −$16.1m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | $1.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | −$25.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.25 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.25 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 102,396,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-04-01 to 2024-06-30 | −$1.4m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2024-06-30 | $35.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-06-30 | $252.7m | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $860.2m | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $240.4m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-06-30 | $664.2m | us-gaap:Liabilities |
| Long-term debt | at 2024-06-30 | $393.8m | us-gaap:LongTermDebtNoncurrent |
| Shareholders' equity | at 2024-06-30 | $196.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 30,188 characters.

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 (the “Exchange Act”) , as amended. Forward-looking statements involve substantial risks and uncertainties. When used in this Report, the words “anticipate,” “believe,” “estimate,” “expect,” “will,” “seeks,” “should,” “could,” “would,” “may,” and similar expressions, as they relate to our management or us, are intended to identify such forward-looking statements. Our actual results, performance, or achievements could differ materially from those expressed in or implied by these forward-looking statements as a result of a variety of factors, including those set forth under “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended March 31, 2024, as well as those described elsewhere in this Report and in our other public filings. The risks included are not exhaustive and additional factors could adversely affect our business and financial performance. We operate in a very competitive and rapidly changing environment. New risk factors emerge from time-to-time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Historical operating results are not necessarily indicative of the trends in operating results for any future period. We do not undertake any obligation to update any forward-looking statements made in this Report. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on known results and trends at the time they are made, to anticipate future results or trends. This Report and all subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

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

### Company Overview

Digital Turbine, Inc., through its subsidiaries (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”). 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

### 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, and the recent conflict in Israel.

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.

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 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 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, 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 next annual evaluation of goodwill for impairment will be as of March 31, 2025.

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.

### 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 $1,072 of business transformation costs in the three months ended June 30, 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.

### RESULTS OF OPERATIONS

The following table sets forth our results of operations for the years ended June 30, 2024 and 2023 (in thousands):

|  | Three months ended June 30, 2024 | 2023 | % of Change |
| --- | ---: | ---: | ---: |
| Net revenue | $117,989 | $146,366 | (19.4)% |
| Costs of revenue and operating expenses |  |  |  |
| Revenue share | 55,809 | 69,592 | (19.8)% |
| Other direct costs of revenue | 7,790 | 9,613 | (19.0)% |
| Product development | 10,714 | 15,800 | (32.2)% |
| Sales and marketing | 16,247 | 15,577 | 4.3% |
| General and administrative | 43,517 | 40,499 | 7.5% |
| Impairment of goodwill | — | — | 100.0% |
| Total costs of revenue and operating expenses | 134,077 | 151,081 | (11.3)% |
| Loss from operations | (16,088) | (4,715) | 241.2% |
| Interest and other income, net |  |  |  |
| Change in fair value of contingent consideration | — | — | 100.0% |
| Interest expense, net | (8,250) | (7,390) | 11.6% |
| Foreign exchange transaction gain | 818 | 1,923 | (57.5)% |
| Other income, net | 114 | 244 | (53.3)% |
| Total interest and other income, net | (7,318) | (5,223) | 40.1% |
| Loss before income taxes | (23,406) | (9,938) | 135.5% |
| Income tax provision (benefit) | 1,750 | (1,539) | (213.7)% |
| Net loss | (25,156) | (8,399) | 199.5% |

### Net revenue

| Net revenue | Three months ended June 30, 2024 | 2023 | % of Change |
| --- | ---: | ---: | ---: |
| On Device Solutions | $80,650 | $98,250 | (17.9)% |
| App Growth Platform | 38,392 | 48,959 | (21.6)% |
| Elimination | (1,053) | (843) | 24.9% |
| Total net revenue | $117,989 | $146,366 | (19.4)% |

### Comparison of the three months ended June 30, 2024 and 2023

Net revenue decreased by $28,377 or 19.4% for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. See the segment discussion below for further details regarding net revenue.

### On Device Solutions

On Device Solutions revenue decreased by $17,600 or 17.9% for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. Revenue from content media increased by approximately $753 primarily due to increased activity with a carrier that resulted in higher daily active users on prepaid devices. Revenue from application media declined by approximately $18,352 due to lower new device volumes in the US and internationally, which was partially offset by an increase in revenue-per-device in the US. Additionally, the decrease is partially due to the winding down of certain strategic demand contracts in the current period.

### App Growth Platform

App Growth Platform revenue decreased by $10,567 or 21.6% for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease was primarily a result of a decline in brand and performance advertising of approximately $4,180, a decline in advertising exchange of approximately $6,400 due to a broader weakness in mobile advertising markets and the impacts of consolidating and exiting of certain legacy AdColony platforms and business lines. These declines were partially offset by an increase in revenue from reseller partnerships of approximately $13.

### Costs of revenue and operating expenses

| Costs of revenue and operating expenses | Three months ended June 30, 2024 | 2023 | % of Change |
| --- | ---: | ---: | ---: |
| Revenue share | $55,809 | $69,592 | (19.8)% |
| Other direct costs of revenue | 7,790 | 9,613 | (19.0)% |
| Product development | 10,714 | 15,800 | (32.2)% |
| Sales and marketing | 16,247 | 15,577 | 4.3% |
| General and administrative | 43,517 | 40,499 | 7.5% |
| Impairment of goodwill | — | — | 100.0% |
| Total costs of revenue and operating expenses | $134,077 | $151,081 | (11.3)% |

### Comparison of the three months ended June 30, 2024 and 2023

Costs of revenue and operating expenses decreased by $17,004 or 11.3% for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily due to lower revenue share, which is the result of lower revenue over the same comparative periods. This decrease was also partially due to lower operating costs, primarily for product development activities. Costs of revenue and operating expenses included severance costs as well as business transformation and acquisition-related costs of $557 and $1,072, respectively, for the three months ended June 30, 2024, compared to $367 and $36, respectively, for the three months ended June 30, 2023. See below for further discussion regarding changes in costs of revenue and operating expenses.

### Revenue share

License fees and revenue share are reflective of amounts paid to our carrier and OEM partners, as well as app publishers and developers, 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 $13,783 or 19.8%, to $55,809 for the three months ended June 30, 2024, compared to $69,592, for the three months ended June 30, 2023. The decrease in license fees and revenue share was similar to the decrease in total net revenues for the same comparable periods.

License fees and revenue share as a percentage of total net revenue was 47.3% for the three months ended June 30, 2024, compared to 47.5% for the three months ended June 30, 2023. The decrease in license fees and revenue share as a percentage of total net revenue was primarily due to revenue mix changes, specifically a lower mix of revenue reported on a net basis as compared to revenue reported on a gross basis during the three months ended June 30, 2024 compared to the three months ended June 30, 2023 .

### 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 decreased by $1,823 to $7,790 for the three months ended June 30, 2024 and was 6.6% as a percentage of total net revenue compared to $9,613, or 6.6% of total net revenue, for the three months ended June 30, 2023. The decrease in other direct costs was primarily due to lower hosting costs as a result of both a strategic switch in web hosting providers during fiscal year 2024 and a comparable decrease in total net revenues between comparable periods. Other direct costs as a percentage of total net revenue remained flat between comparable periods.

### Product development

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

Product development expenses decreased by $5,086 to $10,714 for the three months ended June 30, 2024 compared to $15,800 for the three months ended June 30, 2023. Product development expenses included severance costs of $71 and $183 for the three months ended June 30, 2024 the three months ended June 30, 2023, respectively. Excluding severance costs, product development expenses decreased by $4,974 for the three months ended June 30, 2024.

The decrease in product development expenses, excluding severance costs, was primarily due to lower employee-related costs of approximately $2,535, driven by lower incentive compensation. In addition, product development expenses decreased by approximately $2,439, due to a decline in depreciation and amortization expenses, hosting costs, and professional service fees.

### 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 $670 to $16,247 for the three months ended June 30, 2024 compared to $15,577 for the three months ended June 30, 2023. Sales and marketing expenses included severance costs of $410 and $125 for the three months ended June 30, 2024 and the three months ended June 30, 2023, respectively. Excluding severance costs, sales and marketing expenses increased by $385 for the three months ended June 30, 2024.

The increase in sales and marketing expense after excluding severance costs was primarily due to higher personnel related costs of $945, offset by a decrease in sales and marketing events and travel-related expenses of $233, a decrease in the use of professional services of $197, and lower facilities and other related costs of $207.

### 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 $3,018 to $43,517 for the three months ended June 30, 2024 compared to $40,499 for the three months ended June 30, 2023. General and administrative expenses included severance costs of $76 and business transformation costs of $1,072 for the three months ended June 30, 2024. General and administrative expenses included severance costs and acquisition-related costs of $181 for the three months ended June 30, 2023. Excluding severance costs, acquisition-related costs, and business transformation costs, general and administrative expenses increased by $2,051 for the three months ended June 30, 2024.

The increase in general and administrative expenses after excluding severance costs, acquisition-related costs, and business transformation costs, was primarily due to increased depreciation and amortization costs of $2,377 and increased professional service fees of $1,111, partially offset by $1,437 from decreased stock-based compensation, credit loss expenses, and other operating costs.

### Interest and other income (expense), net

| Interest and other income, net | Three months ended June 30, 2024 | 2023 | % of Change |
| --- | ---: | ---: | ---: |
| Change in fair value of contingent consideration | $— | $— | 100.0% |
| Interest expense, net | $(8,250) | $(7,390) | 11.6% |
| Foreign exchange transaction gain | 818 | 1,923 | (57.5)% |
| Other income, net | 114 | 244 | (53.3)% |
| Total interest and other income, net | $(7,318) | $(5,223) | 40.1% |

### Interest expense, net

For the three months ended June 30, 2024, interest expense, net, increased by $860 or 11.6% compared to the three months ended June 30, 2023, primarily due to an increase in interest rates of 112 basis points offset by lower average outstanding borrowings of $13,967 over the comparative period.

### Foreign exchange transaction gain (loss)

For the three months ended June 30, 2024 and 2024, the Company recorded foreign exchange transaction gains and losses of $818 and $1,923, respectively, that were 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 June 30, 2024, we had unrestricted cash of approximately $35,042 and $29,000 available to draw under the New Credit Agreement with BoA, excluding the accordion feature, subject to the required covenants. We generated $(1,352) in cash flows from operating activities for the three months ended June 30, 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, 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 Report.

### Outstanding Secured Indebtedness

Our outstanding secured indebtedness under the New Credit Agreement is $396,000 as of June 30, 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 $2,209, on our consolidated balance sheets as of June 30, 2024. For further description of the terms of the New Credit Agreement, see Note 10—Debt under the heading “Revolver” in the notes to our condensed 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 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 June 30, 2024, we were in compliance with all covenants under the New Credit Agreement. Additionally, the Company entered into a Fourth Amendment to the New Credit Agreement on August 6, 2024 to

renegotiate its required covenants. Refer to Note 15—Subsequent Events 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 $261,359 over the next six fiscal years.

### Cash Flow Summary ($ in thousands)

| Consolidated statements of cash flows data: | Three months ended June 30, 2024 | 2023 | % of Change |
| --- | ---: | ---: | ---: |
| **Net cash provided by (used in) operating activities** | **$(1,352)** | **$1,318** | **(202.6)%** |
| Equity investments | — | — | (100.0)% |
| Purchase price adjustment related to business acquisition | — | — | (100.0)% |
| Capital expenditures | (5,931) | (7,276) | (18.5)% |
| **Net cash used in investing activities** | **$(5,931)** | **$(7,276)** | **(18.5)%** |
| Proceeds from borrowings | 17,000 | 5,000 | 240.0% |
| Payment of debt issuance costs | — | — | 100.0% |
| Repayment of debt obligations | (7,000) | (10,000) | (30.0)% |
| Acquisition of non-controlling interest in consolidated subsidiaries | — | (3,751) | (100.0)% |
| Payment of withholding taxes for net share settlement of equity awards | (48) | (931) | (94.8)% |
| Options exercised | 14 | 731 | (98.1)% |
| **Net cash provided by (used in) financing activities** | **$9,966** | **$(8,951)** | **(211.3)%** |

### 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 (used in) operating activities was $(1,352) for the three months ended June 30, 2024, compared to $1,318 for the three months ended June 30, 2023. The decrease of $2,670 was due to the following:

- $16,757 increase in net loss;
- $19,994 increase due to changes in operating assets and liabilities, driven primarily by working capital changes, specifically accounts receivable;
- $5,907 decrease in non-cash charges during the three months ended June 30, 2024 primarily related to lower deferred income taxes and stock-based compensation, partially offset by lower foreign exchange transaction gain for the three months ended June 30, 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 three months ended June 30, 2024, net cash used in investing activities decreased by $1,345 to $5,931. Our cash used in investing activities for the three months ended June 30, 2024 and June 30, 2023, was primarily comprised of capital expenditures related to internally-developed software.

### Financing Activities

For the three months ended June 30, 2024, net cash provided by financing activities was $9,966, which was comprised of: (1) the repayment of debt obligations of $7,000, and (2) payment of payroll withholding taxes for net share settlement of equity awards of $48. These cash outflows were offset by cash inflows comprising of proceeds from borrowings of $17,000 and stock option exercises of $14.

For the three months ended June 30, 2023, net cash used in financing activities was $8,951, which was comprised of repayment of debt obligations of $10,000, payment of payroll withholding taxes for net share settlement of equity awards of $931, partially offset by cash inflows from proceeds from borrowings of $5,000 and stock option exercises of $731.

### Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations is based on our unaudited financial statements. The preparation of these financial statements is based on management’s selection and application of accounting policies, some of which require management to make judgments, estimates, and assumptions that affect the amounts reported in the financial statements and notes. For more information regarding our critical accounting policies and estimates, please see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies,” of our Annual Report on Form 10-K for the fiscal year ended March 31, 2024, and Note 2—Basis of Presentation and Summary of Significant Accounting Policies,” of this Report on Form 10-Q for our fiscal first quarter ended June 30, 2024.

## Market risk

As filed, 2,347 characters.

The Company has operations both within the U.S. and internationally and is exposed to market risks in the ordinary course of business - primarily interest rate and foreign currency exchange risks.

### Interest Rate Fluctuation Risk

The primary objective of the Company’s investment activities is to preserve principal while maximizing income without significantly increasing risk. The Company’s cash and cash equivalents consist of cash and deposits, which are sensitive to interest rate changes.

The Company’s borrowings under its credit facility are subject to variable interest rates and thus expose the Company to interest rate fluctuations, depending on the extent to which the Company utilizes its credit facility. If market interest rates materially increase, the Company’s results of operations could be adversely affected. A hypothetical increase in market interest rates of 100 basis points would result in an increase in interest expense of $10 per year for every $1,000 of outstanding debt under the Company’s credit facility. The Company has not used any derivative financial instruments to manage its interest rate risk exposure.

### Foreign Currency Exchange Risk

Foreign currency exchange risk is the risk that the Company’s results of operations and/or financial condition could be affected by changes in exchange rates. The Company has transactions denominated in currencies other than the U.S. dollar, principally the euro, Turkish lira, and British pound, that expose the Company’s operations to risk from the effects of exchange rate movements. Such movements may impact future revenues, expenses, and cash flows. In certain of the Company’s foreign operations, the Company transacts primarily in the U.S. dollar, including for net revenue, revenue share, and employee-related compensation costs, which reduces the Company’s exposure to foreign currency exchange risk. In addition, gains (losses) related to translating certain cash balances, trade accounts receivable and payable balances, and intercompany balances also impact net income. As the Company’s foreign operations expand, results may be impacted further by fluctuations in the exchange rates of the currencies in which the Company does business. The Company has not used any derivative financial instruments to manage its foreign currency exchange risk exposure.

## Controls and procedures

As filed, 2,132 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, regardless of how well they were designed and are operating, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this Report, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

### Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) or 15d-15(d) of the Exchange Act during the three months ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 260 characters.

The Company is not aware of any material changes to the risk factors set forth under Part I, Item 1A, “Risk Factors,” in its Annual Report on Form 10-K for the fiscal year ended March 31, 2024, filed with the Securities and Exchange Commission on May 28, 2024.

Filed Aug 7, 2024.
Source: SEC EDGAR, the filing index for accession 0001628280-24-035686. Last ingested by Listed: Oct 30, 2026, 16:33 ET. No prices; not investment advice.