Digital Turbine, Inc.: Form 10-Q for the period ended Dec 31, 2025

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, 2025, 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”), 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 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 protection 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,” in its Annual Report on Form 10-K for the fiscal year ended March 31, 2025, filed with the Securities and Exchange Commission on June 16, 2025, for additional information related to risks associated with macroeconomic challenges.

Financing Agreement

On August 29, 2025 (the “Closing Date”), the Company refinanced its existing senior credit facility. The Company and certain wholly-owned subsidiaries of the Company, as guarantors (the “Guarantors”), entered into a Financing Agreement (the “Financing Agreement”) with Blue Torch Finance LLC, as administrative agent and as collateral agent (“Administrative Agent”), and the lenders from time to time party thereto (“Lenders”), pursuant to which the Lenders made loans and other extensions to the Company under certain term loan credit facilities on the terms and conditions as set forth therein.

The Financing Agreement (i) has a four-year term from the Closing Date and (ii) provides for three separate tranches of term loans in an aggregate principal amount of $430,000 (the “Loans”), all of which were borrowed in full by the Company on the Closing Date. The Loans are secured by substantially all of the assets of the Company and the Guarantors, subject to certain exceptions.

During the three and nine months ended December 31, 2025, the Company made a payments of $44,908 and $55,000, respectively, on the principal of the Loans with proceeds raised from utilizing the Company’s At-the-Market offering, except for $3,002, which was paid with operating cash. Under the Financing Agreement, the Company has the option to retain proceeds from one or more at-the-market equity issuances up to the aggregate amount not to exceed $5,000. As of December 31, 2025, the Company has not retained any proceeds from such equity issuances.

The Loans accrue interest, at the Company’s option, at a term SOFR rate or a reference rate for U.S. dollar borrowings, plus an applicable margin. The applicable margin for Loans accruing interest at the term SOFR rate ranges from 7.50% to 8.00% and ranges from 6.50% to 7.00% for loans accruing interest at the reference rate. The outstanding principal amount of the Loans is subject to scheduled repayment as follows: (i) on the last day of each fiscal quarter until the maturity of the Loans, the Company will repay the outstanding principal amount of term loans in an amount equal to $2,344 in the aggregate across the remaining two tranches and (ii) on the maturity date, the Company will pay the remaining aggregate outstanding principal amount, including all accrued and unpaid interest thereon. In addition, the Financing Agreement contains certain mandatory prepayment provisions, including from proceeds raised from equity issuances and, beginning in fiscal year 2027, 50% of any excess cash flows, and the Company would also be required to pay certain escalating exit fees and duration fees if one of the two remaining tranches of term loans is not repaid by a certain date.

The Financing Agreement contains various customary affirmative and negative covenants, as well as financial covenants. The Financing Agreement requires the Company to maintain (i) a maximum leverage ratio with step-downs every fiscal quarter and (ii) minimum liquidity of (A) $10,000 from the Closing Date until March 31, 2026 and (B) $20,000 from and after April 1, 2026 until the maturity date, of which no less than $10,000 must be maintained within the United States.

Warrants to Purchase Common Stock

In connection with the Financing Agreement, on the Closing Date, the Company issued warrants (the “August 2025 Warrants”) to purchase an aggregate of 824,421 shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), to certain affiliates of the Lenders (in such capacity, the “August Holders”) at an exercise price of $4.84 per share (the “Exercise Price”), which is equal to the 30-day volume-weighted average price per share of Common Stock ending on and including the trading day immediately preceding the Closing Date. In addition, the Company issued, on September 15, 2025, an additional warrant to purchase an aggregate of 397,997 shares of Common Stock to an affiliate of a Lender (in such capacity, the “September Holder” and, together with the August Holders, the “Holders”) at the Exercise Price (the “September 2025 Warrant” and, together with the August 2025 Warrants, the “2025 Warrants”).

The 2025 Warrants expire on March 1, 2030. The Exercise Price and the number of shares underlying the 2025 Warrants are subject to adjustment in the event of specified events, including a subdivision or combination of the Common Stock, a reclassification of the Common Stock, certain change of control transactions, certain rights offerings or specified dividend payments, subject to certain limitations as set forth in the 2025 Warrants. Upon exercise, the aggregate exercise price may be paid, at each warrant holder’s election, in cash or on a net issuance basis, based upon the fair market value of the Common Stock at the time of exercise.

The Company agreed to provide certain customary registration rights with respect to the resale of shares of Common Stock underlying 2025 Warrants held by or issuable to the holders from time to time. The 2025 Warrants also contain customary indemnity and contribution obligations in connection with such registration.

ATM Offering

On August 5th, 2025, the Company entered into a Sales Agreement with RBC Capital Markets LLC and Craig-Hallum Capital Group LLC as our sales agents, pursuant to which we could offer and sell from time-to-time shares of our Common Stock for aggregate gross proceeds of up to $150,000. During the nine months ended December 31, 2025, the Company sold 9,945,136 shares of Common Stock at an average selling price of $5.89 per share, yielding aggregate gross proceeds of $58,566, and incurred commission costs of $1,757 associated with such sales.

Net proceeds raised subsequent to the execution of the Financing Agreement were used to prepay the principal of the Loans, as required under the Financing Agreement.

On February 2, 2026, the Company delivered notice to RBC Capital Markets, LLC (“RBC”) and Craig-Hallum Capital Group LLC (collectively, the "Agents") of the termination of the Sales Agreement, dated as of August 5, 2025 (the "Sales Agreement"), pursuant to which the Company could offer and sell, from time to time, shares of the Company's common stock, par value $0.0001 per share, having an aggregate offering price of up to $150,000 through the Agents, as sales agents. The Company terminated the Sales Agreement at its sole discretion, as permitted under Section 7(a) of the Sales Agreement. The termination was effective as of February 2, 2026. As of the termination date, the Company had sold an aggregate of 9,945,136 shares of common stock under the Sales Agreement for aggregate gross proceeds of approximately $58,566.

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 next annual evaluation of goodwill for impairment will be as of March 31, 2026.

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.

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 $31 and $1,309 of business transformation costs during the nine months ended December 31, 2025 and December 31, 2024, respectively. 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. The Company launched an additional transformation effort in October 2024, in which the Company began a transformation program intended to improve various measures across the organization. These measures include but were 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, the Company implemented a two phased reduction in our workforce, one in November 2024 and the other in January 2025. No costs associated with our transformation program were incurred during the nine months ended December 31, 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 included several other initiatives and was substantially completed in the fourth quarter of fiscal year 2025. The transformation program was targeted to yield more than $25,000 in annual cash expense savings.

RESULTS OF OPERATIONS

The following table sets forth our results of operations for the three and nine months ended December 31, 2025 and 2024 (in thousands):

Net revenue

Comparison of the three and nine months ended December 31, 2025 and 2024

Over the three-month comparative periods, net revenue increased by $16,762 or 12.4%, and over the nine-month comparative periods, net revenue increased by $51,348 or 13.8%. See the segment discussion below for further details regarding net revenue.

On Device Solutions

ODS revenue for the three months ended December 31, 2025, increased by $7,820 or 8.5% compared to the three months ended December 31, 2024. Revenue from content media increased by $279, primarily due to increased activity with a carrier that resulted in higher daily active users on prepaid devices., and revenue from application media increased by approximately $7,541. This increase was primarily due to higher device volumes internationally and an increase in revenue-per-device in the US and internationally, offset by lower device volumes in the US. The increase in revenue was primarily driven by improved performance in the Asia Pacific and China regions.

ODS revenue for the nine months ended December 31, 2025, increased by $36,668 or 14.4% compared to the nine months ended December 31, 2024. Revenue from content media increased by approximately $1,144 primarily due to increased activity with a carrier that resulted in higher daily active users on prepaid devices. In addition, application media revenue increased by approximately $35,524 for the nine months ended December 31, 2025. The increase in revenue in application media was primarily due to higher device volumes internationally and an increase in revenue-per-device in the US and internationally, offset by lower device volumes in the US. The increase in revenue was primarily driven by improved performance in the Asia Pacific and China regions.

App Growth Platform

AGP revenue for the three months ended December 31, 2025, increased by $8,375 or 18.9% compared to the three months ended December 31, 2024. The increase was primarily driven by higher advertising exchange revenue of approximately $9,719, which was largely due to the continued onboarding of new publishers and demand partners. This increase was partially offset by a decline in performance and brand advertising revenue by approximately $1,073 primarily due to reduced demand by a major brand and a decrease in private marketplace spend. The increase in AGP revenue was primarily driven by higher performance in the Asia Pacific and China regions. Revenues from reseller partnerships decreased by $271, between the comparable periods.

AGP revenue for the nine months ended December 31, 2025, increased by $13,614 or 11.3% compared to the nine months ended December 31, 2024. The increase was primarily a result of an increase in advertising exchange of approximately $22,591, which was largely due to the continued onboarding of new publishers and demand partners. Performance and brand advertising revenue declined by approximately $8,148 primarily due to reduced demand by major brands. The increase in AGP revenue was primarily due to higher performance in the Asia Pacific and China regions. Revenues from reseller partnerships decreased by $829, between the comparable periods.

Costs of revenue and operating expenses

Comparison of the three and nine months ended December 31, 2025 and 2024

Total costs of revenue and operating expenses decreased by $17,645 or 12.0% and decreased by $14,562 or 3.5%, respectively, for the three and nine months ended December 31, 2025, compared to the three and nine months ended December 31, 2024.

The decrease in total costs of revenue and operating expenses for the three months ended December 31, 2025 was due to a decrease in revenue share, product development expenses, sales and marketing expenses, and general and administrative expenses. These decreases were partially offset by higher other direct costs of revenue.

The decrease in total costs of revenue and operating expenses for the nine months ended December 31, 2025 was due to a decrease in sales and marketing expenses and general and administrative expenses. These decreases were partially offset by higher revenue share, other direct costs of revenue, and product development expenses.

Costs of revenue and operating expenses included total business transformation, acquisition-related expenses, and severance costs of $33 and $569 for the three and nine months ended December 31, 2025, respectively, compared to $3,094 and $5,228 for the three and nine months ended December 31, 2024, respectively.

Revenue share

Revenue share includes amounts paid to our carrier and OEM partners, as well as app publishers and developers, and are recorded as a cost of revenue.

Revenue share decreased by $5,522 or 7.9% to $64,425 for the three months ended December 31, 2025, and was 42.6% as a percentage of total net revenue compared to $69,947, or 52.0% of total net revenue, for the three months ended December 31, 2024. The decrease in revenue share and revenue share as a percentage of total net revenue was driven by product mix changes, including certain high-margin product lines driving a higher percentage of total net revenue between the comparative periods.

Revenue share increased by $3,564 or 2.0% to $185,656 for the nine months ended December 31, 2025, and was 43.9% as a percentage of total net revenue compared to $182,092, or 49.0% of total net revenue, for the nine months ended December 31, 2024. The increase in revenue share was attributable to 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 driven by product mix changes, including certain high-margin product lines driving a higher percentage of total net revenue between the comparative periods.

Other direct costs 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, which are fees incurred by the Company for facilitating certain programmatic ad transactions on our exchange platform. These fees are generally calculated as a percentage of gross advertising spend.

Other direct costs of revenue increased by $3,251 or 36.3% to $12,205 for the three months ended December 31, 2025, and was 8.1% as a percentage of total net revenue compared to $8,954, or 6.7% of total net revenue, for the three months ended December 31, 2024.

The increase in other direct costs for the three months ended December 31, 2025 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 in other direct costs was further driven by the achievement of higher revenue targets in the current year. The increase in other direct costs of revenue as a percentage of total net revenue was also due to the monetization methodology changes.

Other direct costs of revenue increased by $9,069 or 36.0% to $34,251 for the nine months ended December 31, 2025, and was 8.1% as a percentage of total net revenue compared to $25,182, or 6.8% of total net revenue, for the nine months ended December 31, 2024.

The increase in other direct costs for the nine months ended December 31, 2025 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 in other direct costs was further driven by the achievement of higher revenue targets in the current year. This increase was offset by lower amortization of developed technology intangible assets between comparable periods. The increase in other direct costs of revenue as a percentage of total net revenue was primarily due to the monetization methodology changes.

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. 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 $311 or 3.0% to $9,892 for the three months ended December 31, 2025, compared to $10,203 for the three months ended December 31, 2024. There were no severance costs included in product development expenses for the three months ended December 31, 2025. Product development expenses included severance costs of $491 for the three months ended December 31, 2024.

Product development expenses, after excluding severance costs, increased by approximately $180 for the three months ended December 31, 2025 compared to the three months ended December 31, 2024. The increase in product development expenses was driven by higher employee-related costs, primarily cash incentive compensation, of $1,438. The increase was partially offset by a decrease in professional service fees of $933, an increase in offsetting capitalization of labor costs related to internally-developed software of $162, and a decrease in hosting and software costs of $163.

Product development expenses increased by $668 or 2.2% to $31,018 for the nine months ended December 31, 2025, compared to $30,350 for the nine months ended December 31, 2024. Product development expenses included severance costs of approximately $105 for the nine months ended December 31, 2025. Product development expenses included severance costs of approximately $671 for the nine months ended December 31, 2024.

Product development expenses, after excluding severance costs, increased by approximately $1,234 for the nine months ended December 31, 2025 compared to the nine months ended December 31, 2024. The increase in product development expenses was primarily driven by higher employee-related costs, primarily cash incentive compensation, of $2,860 and an increase in hosting and software costs of $973. These increases were partially offset by a decrease in professional service fees of $2,045, an increase in offsetting capitalization of labor costs related to internally-developed software of approximately $323, and a decrease in other costs, including travel and recruiting of $231.

Product development expenses, excluding severance costs, changed to 6.5% and 7.3% of total net revenue for the three and nine months ended December 31, 2025, respectively, compared to 7.2% and 8.0% of total net revenue for the three and nine months ended December 31, 2024, respectively. The decrease in product development expenses as a percentage of total net revenue for the three and nine months ended December 31, 2025 was primarily due to revenues increasing at a rate faster than product development expenses.

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 $1,168 or 7.5% to $14,326 for the three months ended December 31, 2025, and was 9.5% as a percentage of total net revenue compared to $15,494, or 11.5% of total net revenue, for the three months ended December 31, 2024. Sales and marketing expenses included severance costs of approximately $33 and $1,018 for the three months ended December 31, 2025 and December 31, 2024, respectively.

Sales and marketing expenses, after excluding severance expenses, decreased by approximately $183 for the three months ended December 31, 2025 compared to the three months ended December 31, 2024. The decrease in sales and marketing expenses was primarily due to a higher offsetting capitalization of labor costs related to internally-developed software of approximately $502, lower events and generation costs of $280, and lower other operating costs, including various travel and facilities costs of $262. These decreases were offset by an increase in employee-related costs of $861.

Sales and marketing expenses decreased by $5,267 or 11.1% to $42,361 for the nine months ended December 31, 2025, and was 10.0% as a percentage of total net revenue compared to $47,628, or 12.8% of total net revenue, for the nine months ended December 31, 2024. Sales and marketing expenses included severance costs of approximately $388 for the nine months ended December 31, 2025. Sales and marketing expenses included severance costs of approximately $1,524 for the nine months ended December 31, 2024.

Sales and marketing expenses, after excluding severance expenses, decreased by approximately $4,131 for the nine months ended December 31, 2025 compared to the nine months ended December 31, 2024. The decrease in sales and marketing expenses was primarily due to lower employee-related costs of $1,259, inclusive of increased cash incentive compensation, higher offsetting capitalization of labor costs related to internally-developed software of approximately $2,128, and lower sales costs for marketing events and lead generation of $743.

The decrease in sales and marketing expenses as a percentage of total net revenue for the three and nine months ended December 31, 2025 were driven by a decrease in overall headcount, improved sales performance, and an increase in offsetting capitalization of employee-related costs.

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.

General and administrative expenses decreased by $13,895 or 32.5% to $28,897 for the three months ended December 31, 2025 compared to $42,792 for the three months ended December 31, 2024. There were no severance and business transformation costs included in general and administrative expenses for the three months ended December 31, 2025. General and administrative expenses included severance, acquisition-related, and business transformation costs of approximately $1,585 for the three months ended December 31, 2024.

General and administrative expenses, after excluding severance, acquisition-related, and business transformations costs, decreased by $12,310 for the three months ended December 31, 2025 compared to the three months ended December 31, 2024. The decrease was primarily due to lower stock-based compensation expense of $7,688, lower depreciation and amortization of $3,041 related to certain intangible assets that became fully amortized in the prior quarter, lower credit loss expense of $1,499, a decrease in facilities expense of $2,040, and a decrease in other costs of $654. These decreases were partially offset by higher costs for professional service fees of $937 and higher employee-related costs of $1,648, primarily driven by cash incentive compensation.

General and administrative expenses decreased by $22,596 or 17.6% to $105,889 for the nine months ended December 31, 2025, compared to $128,485 for the nine months ended December 31, 2024. General and administrative expenses included severance and business transformation costs of approximately $76 for the nine months ended December 31, 2025. General and administrative expenses included severance, acquisition-related, and business transformation costs of $3,033 for the nine months ended December 31, 2024.

General and administrative expenses, after excluding severance, acquisition-related, and business transformation costs, decreased by $19,639 for the nine months ended December 31, 2025 compared to the nine months ended December 31, 2024. The decrease was primarily due to lower stock-based compensation expense of $13,183, lower depreciation and amortization of $4,841 related to certain intangible assets that became fully amortized between comparative periods, lower credit loss expense of $1,955, lower facilities costs of $2,283, lower software and license fees of $381, lower recruiting and relocation costs of $472, and a decrease in other costs of $677. These decreases were partially offset by higher employee-related costs of $2,620, primarily cash incentive compensation, and higher professional fees of $1,529.

Interest and other income (expense), net

Comparison of the three and nine months ended December 31, 2025 and 2024

Interest expense, net

For the three and nine months ended December 31, 2025, interest expense, net, increased by $5,648 or 71.4% and $9,221 or 37.4%, respectively, compared to the three and nine months ended December 31, 2024. The increase was primarily due to increased interest rates of 511 basis points and 268 basis points for the three and nine months, respectively. For the three and nine months ended December 31, 2025 the Company had lower average outstanding borrowings of $10,101 and higher average outstanding borrowings of $3,841, respectively, over the comparative periods. The decrease for the three months ended December 31, 2025 was due to payments on the term loans of $44,908, and the increase for the nine months ended December 31, 2025 was a result of the negotiated terms under the Company’s August 29, 2025 Financing Agreement, in association with the new term loans.

Amortization of debt discount and issuance costs

For the three and nine months ended December 31, 2025, amortization of debt issuance costs increased by $3,474 or 651.8% and $6,649 or 515.4%, respectively, compared to the three and nine months ended December 31, 2024. The increase for the three months ended December 31, 2025 was primarily due to accelerated amortization of the debt discount and issuance costs associated with voluntary prepayments on the principal balance of the term loans during the period.

The increase for the nine months ended December 31, 2025 was primarily due to increased amortization of issuance costs associated with the Fifth Amendment to the Amended and Restated Credit Agreement, signed on June 13, 2025, contributing to higher monthly amortization beginning in June 2025. Subsequently, on August 29, 2025, the Company signed the Financing Agreement, fully paying off the revolver and replacing it with term loans, at which time all remaining capitalized debt issuance costs associated with the Amended and Restated Credit Agreement were fully amortized as a loss on extinguishment of debt. Additionally, the Company made total payments of $55,000 on the principal of the term loans, at which time a pro rata portion of the original issue discount and debt issuance costs were amortized.

Unrealized loss on derivatives

For the three and nine months ended December 31, 2025, there was an increase in unrealized gains of $1,600 and unrealized loss of $735 on derivatives, respectively, compared to the three and nine months ended December 31, 2024. The increase was due to the issuance of the 2025 Warrants in relation to the Company’s Financing Agreement. The Company classified these warrant instruments as derivative liabilities at fair value and adjusts the instruments to fair value at each reporting period. This liability is re-measured at each balance sheet date until the 2025 Warrants are exercised or expire, and any change in fair value will be recognized in the Company’s statements of operations and comprehensive (loss) income as an unrealized gain or loss on derivatives.

Foreign exchange transaction gain (loss)

For the three and nine months ended December 31, 2025, the Company recorded foreign exchange transaction gains of $2,815 and $3,037, respectively. For the three and nine months ended December 31, 2024, the Company recorded foreign exchange transaction losses of $1,037 and $879, respectively. The changes 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.

Loss on extinguishment of debt

For the three and nine months ended December 31, 2025, the Company recorded a loss on extinguishment of debt of $0 and $9,795, respectively, or 0% and 100.0% compared to the three and nine months ended December 31, 2024, during which no loss on extinguishment was incurred. The increase was driven by the amortization of all remaining debt issuance costs associated with the Company’s revolver in connection with the Amended and Restated Credit Agreement, which was terminated and fully paid as of December 31, 2025.

Liquidity and Capital Resources

Liquidity

Our primary sources of liquidity are our cash and cash equivalents, cash from operations, and borrowings under the Financing Agreement. As of December 31, 2025, we had unrestricted cash of approximately $40,180 and restricted cash of approximately $243. For the three and nine months ended December 31, 2025, we incurred net income of $5,107 and a net loss of $30,392, respectively, and generated cash from operating activities of $14,176 and $37,424, respectively.

Our principal cash requirements for the twelve-month period following this Report primarily consist of refinancing certain Loan tranches under the Financing 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, 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 certain Loan tranches under the Financing 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 certain Loan tranches under the Financing Agreement and are exploring options to raise additional capital through the sale of equity securities or equity-linked or debt-financing arrangements. Under the Financing Agreement, the Company is required to pay certain escalating exit fees and duration fees if one of the two remaining tranches of term loans is not repaid by certain dates. If we successfully refinance such Loans on acceptable terms, we believe our existing cash and cash equivalents, cash flow from operations, and ability to access debt financing arrangements 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 such Loans, 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 Loan tranches under the Financing Agreement or to fund our other liquidity needs. See Part I, Item 1A, “Risk Factors,” in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2025, filed with the Securities and Exchange Commission on June 16, 2025, and Part II, Item 1A in this Report for additional information related to the foregoing risks.

Capital Resources

Our outstanding secured indebtedness under the Financing Agreement is $375,000 as of December 31, 2025. The maturity date of the Financing Agreement is August 29, 2029, and the outstanding balance is classified as long-term debt, net of debt issuance costs of $8,067, original issuance discount of $11,965, and short-term debt, net of debt discount and issuance costs of $4,688 on our consolidated balance sheets as of December 31, 2025. For further description of the terms of the Financing Agreement, see Note 11—Debt under the heading “Financing Agreement” 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 Financing Agreement also contains a maximum leverage ratio and minimum liquidity amount. 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 December 31, 2025, we were in compliance with all covenants under the Financing Agreement.

As described above, we are currently seeking to refinance certain Loan tranches under the Financing Agreement and are exploring options to raise additional capital through 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 certain Loan tranches under the Financing Agreement by certain dates, the Company will be required to pay exit and duration fees on such tranches when repaid, which could have a material adverse impact on our business, financial condition and results of operations.

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 $201,925 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 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 $37,424 for the nine months ended December 31, 2025, compared to $372 for the nine months ended December 31, 2024. The increase of $37,052 was due to the following:

• $42,881 decrease in net loss;
• $822 net decrease due to changes in operating assets and liabilities, driven primarily by working capital changes, specifically an increase in the change in accounts receivable and other current assets, and a decrease in the change in other current liabilities. This was primarily offset by an increase in the change in accrued revenue share and accrued compensation, primarily related to the cash incentive compensation;
• $5,007 net decrease in non-cash charges during the nine months ended December 31, 2025 primarily related to a decrease in amortization over intangibles assets, provision for credit losses, and share based compensation. The decrease was primarily offset by the loss on extinguishment of debt, amortization of debt discount and issuance costs, and the unrealized loss on derivatives in the current period.

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 nine months ended December 31, 2025, net cash used in investing activities increased by $2,639 to $23,172. Our cash used in investing activities for the nine months ended December 31, 2025 and December 31, 2024, was primarily comprised of capital expenditures related to internally-developed software.

Financing Activities

For the nine months ended December 31, 2025, net cash used in financing activities was $10,332, which was comprised of: (1) proceeds from borrowings, net of original issue discount of $418,700, (2) the repayment of debt obligations of $466,000 related to the termination and pay-down of the Company’s revolver of $411,000 and $55,000 prepayment on the Company’s new term loans, (3) payment of $20,486 for debt issuance costs, (4) payment of deferred business acquisition consideration of $1,157 and (5) payment of payroll withholding taxes for net share settlement of equity awards of $505. These cash outflows were offset by cash inflows comprising of (1) proceeds from the issuance of common stock in connection with at-the-market offering of $56,809 and (2) stock option exercises of $2,307.

For the nine months ended December 31, 2024, net cash provided by financing activities was $23,245, which was comprised of: (1) the repayment of debt obligations of $13,000, and (2) payment of $1,627 of debt issuance costs, and (3) payment of payroll withholding taxes for net share settlement of equity awards of $231. These cash outflows were offset by cash inflows from proceeds from borrowings of $38,000 and stock option exercises of $103.

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, 2025, and Note 2—Basis of Presentation and Summary of Significant Accounting Policies,” of this Report on Form 10-Q for our fiscal third quarter ended December 31, 2025.

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 Amended and Restated Credit Agreement were, and after the refinancing of such under the Financing Agreement are, subject to variable interest rates and thus expose the Company to interest rate fluctuations. As of December 31, 2025, the Company had borrowed $375,000 under the Financing Agreement. As of December 31, 2025, the interest rate was 11.68%. Market interest rates have increased significantly, and if market interest rates continue to 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 Financing Agreement. The Company has not used any derivative financial instruments to manage its interest rate risk exposure. The Company is potentially exposed to refinancing risk in the future, should the Company seek to refinance its debt or raise new debt. As such, the type, cost, and terms of any new debt potentially raised in the future may differ from that of our existing debt agreements.

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, which 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.

Fair Value Risk

The Company holds a financial liability in the form of a derivative liability related to the 2025 Warrants issued in connection with the Financing Agreement, which are measured at fair value and recorded through net income (loss) in our consolidated statements of operations and comprehensive (loss) income. The fair value of the derivative liability fluctuates based on the market price of the Company’s common stock. The initial fair value of the derivative liability was estimated using a Black-Scholes model, with an initial valuation of $3.00 per share. An increase in the Company’s stock price would result in an increase in the fair value of the liability and a resulting unrealized loss on derivatives on the consolidated statements of operations and comprehensive (loss) income.

Further information regarding the fair value of the derivative liability that is measured on a recurring basis is presented in Note 4—Fair Value Measurements to the accompanying condensed consolidated financial statements included in this Form 10-Q.

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 December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Except as set forth below, 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, 2025, filed with the Securities and Exchange Commission on June 16, 2025.

We have secured and unsecured indebtedness, a portion of which the Company intends to refinance and which could limit our financial flexibility. As of September 30, 2025, we had $375,000 outstanding under the Financing Agreement. As of September 30, 2025, we had unrestricted cash of approximately $40,180 and restricted cash of approximately $243.

On August 29, 2025 (the “Closing Date”), the Company refinanced its existing senior credit facility. The Company and certain wholly-owned subsidiaries of the Company, as guarantors (the “Guarantors”), entered into a Financing Agreement (the “Financing Agreement”) with Blue Torch Finance LLC, as administrative agent and as collateral agent (“Administrative Agent”), and the lenders from time to time party thereto (“Lenders”), pursuant to which the Lenders made loans and other extensions to the Company under certain term loan credit facilities on the terms and conditions as set forth therein.

The Financing Agreement (i) has a four-year term from the Closing Date and (ii) provides for three separate tranches of term loans in an aggregate principal amount of $430,000 (the “Loans”), all of which were borrowed in full by the Company on the Closing Date. The outstanding principal amount of the Loans is subject to scheduled repayment as follows: (i) on the last day of each fiscal quarter until the maturity of the Loans, the Company will repay the outstanding principal amount of term loans in an amount equal to $2,344 in the aggregate across the remaining two tranches and (ii) on the maturity date, the Company will pay the remaining aggregate outstanding principal amount, including all accrued and unpaid interest thereon. In addition, the Financing Agreement contains certain mandatory prepayment provisions, including proceeds raised from equity issuances and, beginning in fiscal year 2027, 50% of any excess cash flows, and the Company would also be required to pay certain escalating exit fees and duration fees if two tranches of term loans are not repaid by certain dates.

The Loans are secured by substantially all of the assets of the Company and the Guarantors, subject to certain exceptions.

The Financing Agreement, the amount of indebtedness thereunder, the terms of the tranches and related mandatory prepayment provisions, and the Company’s desire to refinance certain tranches could have significant negative consequences including:

• increasing our vulnerability to general adverse economic and industry conditions;
• increasing our exposure to interest rate risk;
• limiting our ability to obtain additional financing;
• increasing our risk of violating a financial covenant, resulting in the indebtedness being due immediately and negatively impacting our liquidity;
• increasing our risk of 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 our flexibility in planning for, or reacting to, changes in our business and the industry in which it competes; and
• placing us at a possible competitive disadvantage to less leveraged competitors that are larger and may have better access to capital resources.

Our borrowings under our credit facility are subject to variable interest rates and thus expose us to interest rate fluctuations. If market interest rates continue to increase, our results of operations could be adversely affected. Our Financing Agreement also contains a maximum leverage ratio and other financial covenants. If we fail to satisfy these covenants, the lenders may declare a default, which could lead to acceleration of the debt’s maturity. Any such default would have a material adverse effect on us. 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 certain tranches of the Refinancing 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 certain tranches under the Financing Agreement or to fund our other liquidity needs.

The collateral pledged to secure our secured debt, consisting of substantially all of our and our U.S. and certain foreign 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 assets, there could be little, if any, assets available for common stockholders in any foreclosure or forced sale.

We are currently seeking to refinance certain tranches under the Refinancing Agreement and are exploring options to raise additional capital through 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 certain Loan tranches under the Financing Agreement by certain dates, the Company will be required to pay exit and duration fees on such tranches when repaid, which could have a material adverse impact on our business, financial condition and results of operations.