Ghen Laraya - VP, Business Affairs Bill Stone - CEO Andrew Schleimer - EVP & CFO

Mike Malouf - Craig-Hallum Capital Group Andrew D'Silva - Merriman Capital Bill Sutherland - Emerging Growth Equities Jon Hickman - Ladenburg Ilya Grozovsky - National Securities

Welcome to the Digital Turbine Fourth Quarter 2015 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to Ghen Laraya, Vice President of Business Affairs. Please go ahead.

Thank you. And welcome everyone to Digital Turbine's fiscal 2015 fourth quarter earnings conference call. I’m Ghen Laraya. With me today are Bill Stone, Digital Turbine's Chief Executive Officer; Andrew Schleimer, our Executive Vice President and Chief Financial Officer. Statements made on this call including those during the question-and-answer session may contain forward-looking statements that are subject to risks and uncertainties. Please refer to the Safe Harbor Statement included in today’s press release, as well as Digital Turbine's periodic filings with the SEC for a complete discussion of the risks and uncertainties that could cause actual results to differ materially from those you may perceive today. We will be discussing certain non-GAAP financial results. The press release issued earlier today contains a reconciliation of these non-GAAP financial results to their most comparable GAAP measures. Now it is my pleasure to turn the call over to Bill Stone.

Thanks Ghen, and thank you all for joining us today. I will start with a review of our fourth quarter, in particular advertising ramp which is the combination of Ignite, IQ, and Digital Turbine Media and also we will give you an update on the Core Appia and Appia integration and tell you about the exciting things we’re doing in terms of broadening our product and distribution foot prints and driving revenue per device. And then Andrew will take you through the numbers and then we will open it up for Q&A. So let's get started. First, I want to provide an update on guidance for this current quarter. We’re having a strong quarter and as a result are revising our guidance to the upper end of the previously stated range of $17 million to $19 million. There are a number of potential positive things that we’re working on that could allow us to exceed that guidance, and Andrew will provide some color on that later. But let's first close out fiscal 2015 ending March 31. Digital Turbine's fiscal fourth quarter demonstrated the following takeaway's. The content business has not only stabilized but has shown material growth. Despite seasonality, January was higher than December and the business has diversified away from being relying upon any one individual content source. In constant currency, the September month saw $1.2 million of revenue. This contrasts to 1.8 million in December, 2.1 million in January, and 2.5 million in March. The Ignite business continues to ramp, but as discussed before, it's still dependent in the short term with new device launches. As we thought might happen, the fiscal fourth quarter saw no new major device launches as new roll-outs got pushed into April and was heavily reliant upon the Samsung Galaxy Note 4. The good news here is that our capability was still demonstrated in the fourth quarter by the tail of the strong device, and as I will discuss in the context of our current fiscal first quarter, we are seeing the new device launches having a material impact on our ramp. The Appia core business, the pure advertising business external to Digital Turbine media finished strong, contributing approximately $2.9 million in revenue for the 26 days of the quarter. Appia's March quarter performance was solid, particularly in view of its strong seasonal performance in the December quarter. Let me now provide some color on the various products including Ignite, IQ, the Appia core, and content. As I know, many of you are interested in both fourth quarter and the current quarter trends, I will talk about both. For Ignite, we think about revenue growth in four dimensions, the first is the number of devices sold with our existing partners, the second is the yield or revenue per device, the third is growth within our existing partners into additional markets, and the final one is expansion of new distribution partners. First, regarding devices, we have launched on more than 20 new devices this calendar 2015 across 10 different partners with the most material including the Samsung Galaxy S6, the S6 Edge, the HTC M9, and most recently the LG G4. The Note 4 launched last October continues to be a solid performer for us exceeding our forecast for sales, and as it has been reported by Samsung, the Galaxy S6 is also off to a strong start. This has been offset by the public news by HTC on its disappointing sales of the M9 and the delay of the LG G4 pushed from May until June. As we have discussed many times, once we’re across all the devices in a particular operator's line-up, these issues become muted as we’re no longer betting on the winners and losers of a particular device model. But in the short term, it can affect the numbers in both directions. Again, we enjoyed a solid performance from the Note 4 in the fourth quarter and our Q1 performance in terms of new launches is solid. This momentum supports our conviction on the upper end of our first quarter outlook range. Secondly, we’re seeing the business model evolve to drive yield on the device. We have just begun proving demand in revenue from the home screen. Now we’re moving into the next phase of revenue growth, which is focusing on optimizing the yield. We continue to do CPI campaigns, which can average anywhere from $1 to $3 in the U.S. and we have seen anywhere from 10% to mid-60% open rates. We are also seeing the emergence of new business models such as cost per placement or CPP and cost per action or CPA. We are running CPA campaigns today with rates of $5 and seen opens per device of anywhere from 15% to 20% and running CPP campaigns that have rates anywhere from $0.30 to $0.80 here in the U.S. where we get paid on 100% of the opens. It's very early days here and we’re spending a lot of time trialing, experimenting, and finding the right balance of which advertisers, which devices, which segments, which business models, right number of slots, and so on to all optimized across the device. We’re still in the first inning of getting this model right for the advertisers for us and for our carrier partners. However, one thing is clear, there is demand for all stakeholders. The single biggest item that’s going to drive accretion on the yield per device is quality, and the technologies and engines we’re integrating now are all examples that are going to allow us to get the right app to the right customer at the right time. These are the key things that will drive revenue per device performance. Third, regarding our Ignite partners, we’re also seeing growth internationally. Although still modest in total numbers, our growth from international in May was over 900% higher than in January, this has been driven by Vodafone, Globe, Singtel, Celcom, MSAI. We do expect to see international continue to show strong growth. And while the average yields are a bit lower, the growth potential of the device is enormous. With our recent launches of Deutsche Telekom and CloudFone and many others deep in the pipeline we do expect to see material growth from international Ignite revenue going forward. Finally I wanted to talk about new partners, strategically today we have been focused on mobile operators. Especially in developed markets, the mobile operators have control on what the customer sees on their device. We have had good success in establishing anchor tenants around the world for this strategy with Verizon here in the United States, Deutsche Telekom in Europe, and Singtel in Asia. It allows us to establish a geographic foothold in a particular market to expand upon. Although I don’t have anything specific to announce today, our traction with real world deployments has created a very strong pipeline of a number of Tier 1 customers both here in the United States and around the globe, we’re very excited and optimistic about. The credibility of having commercial deployments with Tier 1 operators is a very positive selling point for us. In the developing world, we see a bit of different dynamic. In many markets, customers purchase simcards from the operator and bring their own device to the operator for activation. While operators do sell some devices and we have relationships, in these cases getting the opportunity of app installs has to have multiple approaches. To-date we have announced that we will be handling app install for HTC, Asus and Acer globally. I'm pleased to announce today that we have also added Sony to that list. These OEM revenue opportunities are not factored into our fiscal 2016 guidance but we know in aggregate these customers do ship 10s of millions of devices per year so we’re extremely upbeat about the prospects. Taken all together this means more devices, more markets, more partners, and higher quality targeting tools to drive yield. These are the corner stones of Ignite advertising ramp. For IQ we have announced our expansion of additional devices with T-Mobile, we expect to see numerous new devices launched with IQ over the next 90 to 122 days with them. We have also launched IQ with Vodafone and are installing it across all of their Android line-up in Australia. While the revenue is not a driver of our results today, nor materially factored into our guidance we do see many reasons why we believe IQ has the opportunity to be a high growth revenue engine as we go forward particularly as we get into fiscal 2017. In the Appia Core and DT Media business we now have owned the business approximately 100 days and are thesis has not changed. It was a transformative acquisition and is now generating solid results for the overall Digital Turbine Group. Combined with our content business Appia Core creates a solid floor of revenues. The current and future ramp for Appia Core business will be driven by four key things. First is secular macro-tailwinds, the app install market is forecasted to grow 30% year-over-year. The Appia Core business is positioned well to capture share of this growth. Second, is expansion by geography, today over 50% of the customers who click on an Appia app install ad are outside the United States and this has been accomplished with only four resources staffed outside of the United States. We see a tremendous opportunity to grow international traffic by leveraging the Digital Turbine existing international infrastructure. We have recently hired resources in both China and Israel and are looking to expand into other geographies. We expect to see Appia's growth expand internationally. Next is expansion of advertisers, we currently have 60 of the Top 100 apps in the Google Play Store as customers. We see tremendous opportunity to expand this to other brands. Year-to-date we have added major app developers and brands such as Twitter, StarHub, Trivago, Airbnb, CBS and Lyft while renewing popular brands such as Pandora, Dominoes and Expedia and so on. Most of these brands are spending dollars with us on both the app beta [ph] and Digital Turbine Media networks making Digital Turbine a one-stop shop for both Android and iOS. We currently also have 100s of global publishers across all continents. Finding and keeping quality publishers that allow us to show advertisers is critical to both renewing existing advertisers as we can demonstrate a strong pie or post-install event data to the advertiser but also allow us to have a bigger distribution pipe to meet the backlog of demand we have from our advertising partners. And finally regarding Appia, I wanted to touch on the integration. The integration has been going extremely well and it's ahead of schedule. We have integrated much of our technology, product, business development and campaign management processes. Our employees are all now on common benefits, payroll, equity plans etcetera and in the first 100 days we have only had one employee voluntarily lead the company. Our focus for the next 100 days will be to more tightly integrate the technical teams and prove our reporting integration and focus on our existing branding and marketing communications. For the content business as mentioned earlier we have stabilized and have seen growth in this business. The revenue is now diversified amongst dozens of different content providers versus being controlled by one dominant provider as it was a year ago. Although the exchange rate headwinds continue to be a challenge, in constant currency the MAI [ph] business we acquired two years ago is now doing greater than a 100% annualized revenue growth compared to before we acquired it. One another strategic decision we have made this quarter was to discontinue our content relationship with Celcom in Israel. We expect to continue our Ignite relationship with them but the cost to support and migrate Celcom to our go forward content platform we use in other geographies combined with our strategic focus in other areas were not worth the very limited financial benefits. We expect this to be a $1.1 million reduction in revenue for this current fiscal year but we have already baked this into our annual guidance we provided earlier. To continue our growth in the content business we’re focused on the following, first it's expansion in new markets and we have expanded our relationships with both Electronic Arts and Disney to distribute their content into numerous South-East Asian markets as an example. Second, expansion of new products, we have launched our in-app billing wrapper [ph] that allows customers to subscribe to content, make in-app purchases directly on their mobile phone bill. This is good for customers for increased flexibility of payment and great for content providers and operators for additional revenue streams. And finally as expansion of new customers and services, we now have 82 different DT Pay Services that our content providers offer to customers which compares to 22 a year ago. So to wrap up fiscal '15 it was a transformative year for the business. We inquired important businesses to build division, showcase Tier 1 customer demand for the products and turned around our content business. Before I turn it over to Andrew, I did want to touch on the company strategy as we in our fiscal 2016. For the immediate term, our focus is on execution and demonstrating results growth and traction. Our strategy is to pull each of our three growth levers by expanding the product footprint in existing carriers and devices as the successes of Ignite and IQ each drive customer demand for the other. And also focusing on expanding our distribution channels and maximizing revenue per device, however in addition to achieving these financial expression of the execution of our strategy we’re thinking ahead to the future. There is a tremendous opportunity to join our software to any company touching the mobile subscriber that wants to monetize mobile and enhance the user experience, this has growth opportunities across multiple types of screens, a broad distribution footprint and expanded and integrated products. On screens we have focused on smartphones for the purposes of focus and the current market opportunity but we see our software on any screen from a phone to a tablet to a television, to a wearable to an automobile, the software has been built and designed with these screens in minds. On distribution there are still 100s of global operators we’re targeting but today you’re seeing extension of our distribution strategy to OEMs which we see as key in many parts of the world. We also see opportunity to expand to retailers, distributors, chipset providers and so on as a distribution model can support anyone who is touching a mobile subscriber. On the product side with content, pay, [indiscernible] Appia, Ignite and IQ we now have the pieces in place and are aggressively working to integrate them into a common suite of products and offerings to deliver against our mission. We can deliver the right app via Ignite or IQ with our Appia network, and serve it up at our content management system and have the customer put any charges for their app on their mobile phone bill. Today these are separate things, tomorrow they will work together as a single eco-system in our operator and OEM customers wanted and the end customers expected. In short Digital Turbine is more than a single product company with a single customer here in the United States. The opportunity is much larger and we plan on pursuing growth across a wide range of dimensions. With that let me turn it over to Andrew.

Thanks, Bill and good morning. I will start with a review of our financial results for the fourth quarter and the fiscal year 2015 and we will conclude with some additional color and perspective on our revised Q1 financial outlook as well as our full year outlook. Please note that since the Appia acquisition closed on March the 6th, consolidated fourth quarter financial results include 26 days of Appia and therefore are not directly comparable to prior periods results. In addition for the fourth quarter's results all comparisons are being made to the prior sequential quarter in less specifically noted. We believe that this is a better indicator of how our business is performing given the vast differences between our company today and at this time last year. Before I start I would like to take a bit of time to remind you of our two reporting segments so that we’re all aligned on how we intend to report and describe our business on a go forward basis. We have two reporting segments, advertising and content with advertising comprise of Appia Core and DT Media and content comprised of DT Marketplace and DT Pay. Recalled in our content business, the wireless carrier is our customer and we provide content and billing services to them. However in the advertising business our customer is the advertiser and we distribute applications through a network of publishers that include mobile websites, mobile applications and the carrier home screen. This is a key distinction namely as we demonstrate the importance of advertiser relationships and the strategic rationale for the Appia transaction. As the advertisers are the ones writing the checks to Digital Turbine. While our distribution network is important, our ability to drive long term meaningful relationships with application developers via the delivery of high quality users with demonstrable ROI is crucial to our success. With that backdrop let's move to discussion of our reported results. Revenue for the fiscal fourth quarter was 10.2 million compared with 7 million for the fiscal third quarter for sequential growth of 46%. On a constant currency basis excluding the impact of the Australian dollar of approximately $600,000 as compared to Q3, fourth quarter revenue increase 55% to 10.8 million, 36% of fourth quarter revenue was generated from our advertising business versus 26% in the fiscal third quarter while 64% of fourth quarter revenue was generated from our content business as compared to 74% in the fiscal third quarter. While our content business exhibited growth on an overall absolute basis the mix shift in revenue between segments relative to the third quarter was driven primarily by the inclusion of 26 days of Appia within the advertising segment. Advertising revenue in the quarter including 26 days of Appia approximately doubled from the prior quarter to $3.7 million. Off this the Appia core business represented approximately 2.9 million with the remainder of revenue generated by DT Media via our Ignite platform. As we have discussed on prior calls we had expected Q4 results to come in towards the bottom-end of our outlook range if all new device launches were pushed into April and this is infact exactly what transpired. Reiterating Bill's comments it's important to note that DT Media revenues for Q4 rested primarily on the continued performance of those devices launched in Q3 in particular the Samsung Galaxy Note 4 as there were no new material device launches in fiscal Q4. New devices pushed into April coupled with a seasonally high holiday device selling season in Q3, provided for a tough sequential comp however we believe the resilience of our performance in the fourth quarter demonstrates our successful Ignite and IQ business models. Content revenue in the quarter of 6.5 million grew 27% over the third quarter were approximately 39% on a constant currency basis driven by new DT Pay and the DT Marketplace customers. Revenues are now diversified across dozens of different content providers versus being controlled by one dominant player only 12 months ago. As we also continue to expand into new markets and penetrate existing customers with new products we expect this business to continue it's upward trajectory. Geographically on a reported basis revenue in the fourth quarter was generated primarily from business in Australia and United States. The United States is becoming a larger percentage of our total revenue at 37% in Q4, up from 25% in Q3 largely due to the inclusion of 26 days of Appia revenue. Australia represented 60% of our revenues in Q4, compared to 68% of our revenues in Q3 while realizing absolute growth of 31% on a reported basis and approximately 44% absolute growth on a constant currency basis driven by the excellent content business performance as previously alluded. Note that for the reporting purchases we have included 100% of Appia's revenue in the United States geography but as Bill discussed earlier over 50% of the customers who click on an Appia Core ad are outside of the United States and we see a tremendous opportunity to grow this revenue stream internationally as we ramp up support in the regions. Adjusted gross profit which excludes intangible amortization was 1.8 million or 18% of revenue compared to 2.4 million or 34% of revenue for the third quarter of fiscal '15. The comparison is attributable to revenue mix specifically a higher proportion of DT Pay revenue within content by the inclusion of lower margin Appia Core revenues and by a lower percentage of DT Media revenue including a lower contribution from amounts earned from carriers related to sharing of cost to software customization and integration prior to device launches all relative to the prior period. Moving forward given new device launches in fiscal Q1 we expect our higher margin DT Media business to contribute in a more meaningful way to revenue and in turn gross margin. That said it is important to note that Appia Core margins which run approximately 20% on average were further diluted in the fourth quarter by ongoing additional investment in our real time bidding platform in an effort to improve overall bidder performance. We expect to maintain a 20% gross margin on the Appia Core business going forward. GAAP gross profit was just under a $1 million or 9% of revenue for the fourth quarter of fiscal 2015 from 2 million or 28% of revenues for the third quarter of fiscal '15 due to the factors related to mix I just mentioned and as importantly to the incremental amortization of approximately $0.5 million associated with the inclusion of newly acquired intangibles relating to the Appia deal. Advertising represented 39% of our adjusted gross profit in the fourth quarter versus approximately 50% in the third quarter reflecting the quarter's revenue mix as we have just discussed and the inclusion of 26 days of Appia. Total advertising gross margin in the quarter was 20% comprised of a mix of lower margin Appia core business and a lower proportion of higher margin DT Media business. Content represented 61% of our adjusted gross profit in the fourth quarter versus 50% in the third quarter again reflecting the quarter's revenue mix as we have discussed. Content gross margin was approximately 17% driven primarily by a higher overall mix of DT Pay revenues within content. Total operating expenses for the fiscal fourth quarter were 10 million versus 7.4 million for this year's third quarter. The increase is driven by the inclusion of 26 days of Appia and the severance related to executive officers, continued investment in support of our product launches with new carrier partners and increase in non-cash items namely depreciation in stock based compensation which was somewhat offset by a reduction of costs associated with acquisition. Total OpEx included 3 million and 1.3 million of non-cash items, depreciation and stock based compensation namely for the fourth and third quarter respectively. Our loss from continuing operations net of income taxes for the fiscal fourth quarter was 9.4 million or $0.22 a share based on 43.2 million weighted average shares outstanding. At the deal closing we issued approximately 18.9 million shares to Appia shareholders or roughly 33% of the combined company which serve to increase our weighted average count in the period. Net loss from continuing operations for the third quarter was 5.5 million or $0.15 per share based on 37.8 million weighted average shares outstanding. Non-GAAP adjusted EBITDA loss for the fourth quarter of '15 was 4.6 million, compared to 2.6 million for the third quarter, note that we recently revaluated our definition of adjusted EBITDA at the end of this fiscal year and have determined that we will no longer exclude bonuses or the accrual for bonuses or the accrual for the bonuses from our non-GAAP measure of adjusted EBITDA. Touching briefly on full year fiscal '15, for the year revenue increased 16% to 28.3 million from 24.4 million driven by the deployments of Ignite and IQ with new carrier partners in the U.S. and Appia's 26 day contribution offset by a moderate decline in the content business resulting from soft performance in the front half of the year. Masked by this fairly moderate growth is the transformation of our business model and the creation of our advertising business ramp which is already driving accelerated growth in fiscal '16. Gross margin for the full year of '15 was 22% on an as reported basis and 29% on a non-GAAP basis respectively. Now let's move to the balance sheet which is key to our ability to pursue and capture our market opportunity. Cash, cash equivalents and restricted cash totaled $7.3 million at March 31, compared with 11.6 million at December 31. At the closing of the Appia transaction Appia contributed 1.4 million in cash. Cash and cash equivalents decreased primarily from the payment of fees and expenses associated with the Appia acquisition which were comprised of the payment of accrued interest on Appia subordinated debt as well as fees to Appia's financial advisors and counsel which in the aggregate totaled just over $3 million. The remainder of the use of cash in the period was related to Digital Turbine's operations as well as partial payment of the company's portion of fees and expenses related to the deal. As a reminder our cash is primarily domicile in United States and Australia. For the avoidance of doubt we acquired the Australian business of MIA and structured the transaction such that we have the ability to repatriate cash quickly and tax efficiently via a reduction of principle of inter-company debt. That said cash from operations today in Australia is currently being utilized to invest in the Australia business. During the quarter we closed the acquisition of Appia and put approximately 10.7 million of debt net of discount on the balance sheet comprised of a $600,000 term loan, 3 million outstanding under the revolving credit facility at the time and 7.1 million of subordinated debt. To ensure that our revenue ramp is sufficiently funded we have been managing cash and working capital carefully, controlling all working capital accounts and leaving no stone unturned. This is evidenced by our Q4 cash burn from operations of just less than $3 million. As we stated at the closing of Appia and in various call since we have been working to enhance and expand our relationship with our senior lender Silicon Valley Bank and today announced our first step toward achieving our goals. This morning we announced that we entered into an amended and restated loan agreement with Silicon Valley Bank to increase the availability under our revolving credit facility by $1.5 million to a full facility amount of 5 million and to extend the maturity on the revolver by one year from June 30, 2015 to June 30, 2016. We now have this incremental borrowing capacity subject to continued increases in our accounts receivable at our disposable to help fund working capital and fuel our continued growth. Looking out into the future our goals to execute step two of this transaction which will provide availability sufficient to refinance our subordinated debt. At the same time as you were aware and as we were required by the terms of the Appia transaction we have filed a registration statement that was declared effective by the SEC on April 24th. This shelf satisfies our registration right to obligation in connection with our subordinated debt. While we will continue to responsibly manage cash on hand and have upsized our facility with Silicon Valley Bank the availability of an effective shelf enhances our ability to take advantage and more aggressively pursue additional organic and inorganic growth opportunities should they present themselves in the future. The shelf registration may also be a tool to deal with the release of the first lock-up tranche relating to Appia stock on the horizon in September. Now turning to our financial outlook, today we’re reiterating our guidance for the full 2016 fiscal year, to recap our guidance includes revenue in the range of 110 million to 130 million, non-GAAP adjusted gross margin in the mid-30% range and adjusted EBITDA positive for the full fiscal year. As set forth in our press release this morning, the company has reevaluated it's stance on the exclusion of bonuses from adjusted EBITDA and is reiterating this outlook assuming bonuses are included in the adjusted EBITDA calculation. Now turning to Q1, as Bill mentioned we’re updating our outlook to the upper end of the $17 million to $19 million. The following month of June initiatives could further enhance our outlook and potentially put us above the upper end of our range. Number one, our expected seasonal ramp from graduation and Father's Day in our advertising business. Number two, a more meaningful contribution from the launch of LG G4 which just launched recently after some delays. Number 3, increased spend from a number of targeted advertisers on the Appia Core network and finally number four the delivery of additional professional services for Ignite customers. That concludes my prepared remarks and with that we would like to turn it over to the operator for Q&A.

[Operator Instructions]. And our first question comes from Mike Malouf of Craig-Hallum Capital Group. Please go ahead.

Can we start off Bill, on the OEM, because that seems to be a nice change in the business model, can you talk a little bit about how this Ignite actually get installed at the point of manufacture and then you are putting apps on the phone at the point of provisioning similar to Ignite now or can you just talk a little bit about how that would work? Thanks.

Yes, sure. So regarding the OEM strategy, it's actually kind of two different prong story here. One is we have relationship with an OEM in the Middle-East called TouchMate and one in the Pacific Rim called CloudFone that is installing Ignite on the devices, and the business model is similar to that of the operators where those particular OEMs have some local market traction. The issues with or the opportunities with HTC, Acer, Asus, and we announced for Sony today is really more on the user interface. So all of these companies are trying to customize and build stickiness into their products and so they have got different types of feeds for example HTC has a something called touch feed, touch sense excuse me where you can customize your feeds for ESPN and Twitter and your contacts, pictures and so on, and so they had a lot of success with that and now they want to figure how to monetize it. So what we’re doing with those OEMs on a global basis is we’re now feeding in all the Appia app installed network into those OEMs. So it's not Ignite going on those phones, but what it is, is we’re handling all the app install monetization that they are going to do from the iBall is now spending time in those user experiences and what's important here is A, that it's global so this is not just a U.S. story, and so it helps address some of the emerging market issues around how you get to monetize when people are buying simcards and secondly it really allows us a great opportunity to get a foothold in with those OEMs for other products and services.

And then just a question on monetization per phone, can you talk a little bit about you’ve been doing this for a little while now, probably have a better idea than you did six months ago. Can you help us with what your targets are with regards to monetization per phone? What is the opportunity for that monetization given the better day that you’re going to have here pretty quickly, and then just maybe compare, contrast that of the U.S. and then international?

Sure. So what we’re seeing right now is good accretion, so every day we’re getting better at this and what we’re seeing here into June is better than what we saw in May, and May was better than what we saw in April and so and so. We’re getting better at it. The thing that why we didn’t put some off that specific, we will on our updated call in for the quarter in August, it's just bouncing around a lot I will give you a simple example. We have one customer that just went from two slots to four slots, so the yield per device just doubled overnight. So clearly that’s a positive development, but in terms of just the average as we’re still getting the model straight, I touched on the CPA example of $5 where we’re seeing 15% - 20% open rates which would yield close to basically a $1 for that slot. That’s a new model for us, that’s emerging. So given things are bouncing around on a daily basis. We don’t want to put something out there today just given that it's moving around a lot. But it's moving around now in the right direction for us, so we’re excited about that. What I will say in the United States is that we’re seeing pretty similar rates to the United States and Australia and then as we go into markets like India and the Philippines, we were probably taking around say probably 50% or so reduction, but that’s offset by obviously opportunity for materially increased volumes.

And our next comes from Andrew D'Silva of Merriman Capital. Please go ahead. Andrew D'Silva: Just got a few questions for you, as far as Ignite devices go during the quarter, are you able to disclose how many devices you added during the quarter?

So Andy, for this current quarter we are seeing a material ramp, we will disclose that on the August call given all the new material device launches that have occurred, but we didn’t disclose anything for the end of the fiscal fourth quarter. Andrew D'Silva: And then kind of elaborating on one of the question that was just asked, as far as your OEM partners, Sony, TouchMate, HTC, so and so forth, the majority of them are using Appia correct, and not Ignite other than TouchMate, they are all utilizing the Appia platform is that the right way to think about it?

So I would think of these OEMs and this is a great synergy from the transaction of, I would think of the OEMs as another publisher for Appia in terms of how we’re utilizing them, but then we’re using our kind of business development at global scale to kind of help round that out and compliment it and then use the opportunity for the other products and services such as Ignite and IQ and marketplace as future business development opportunities with those customers. Andrew D'Silva: And then you went to a conference last month, and you had put out a slide deck and it had some nice metrics as far as how many devices are sold by each of those OEMs and it came out to around 46 million, excluding Sony obviously because that was just announced. Are you assuming that out of those 46 million devices, you’re on all of them or is there an assumption to certain devices that you’re going to be on, a little clarity there would be useful as well.

Yes, so it varies by manufacturer, but basically I think about it is across all of those Android devices you know, both smartphones and tablets that will be on a go-forward basis. Andrew D'Silva: And then continuing with that confidence, you essentially said that you were restating guidance for 2015 as well as 2016, I'm just trying to get my hands around this. When you restated your fiscal year '15 guidance at the conference in your initial full-year guidance stated revenues would be $20 million and $32 million with I think adjusted gross margins at 30% range. What exactly changed or what was missed then for your gross margins to come into low now and then what structurally is changing going forward into 2016 that gives you the confidence that your gross margins are going to be trending up so much more than they were at the end of the year now that Appia is in and that’s going to be substantially lower than what you’re guiding for.

Yes let me start with that and I will then turn it over to Andrew for some color. Yes, so really the gross margin story for us hasn’t changed as we look at on an annualized basis. You know given where we’re at right now that we’re going to see some variations in mix from quarter to quarter and the mix between the content business and the Appia core business for the quarter obviously negatively impacted gross margin as some of the things that Andrew talked about with professional services, you know the ramp of additional Ignite and IQ customers that will positively impact gross margin. I remember [indiscernible] works is done at a 100% gross margin. So those were all things that will impact us positively and so as we look at it from an annual perspectives that’s why we are comfortable in the mid-30 range although on a quarter to quarter basis you could see it bounce around a little bit.

Yes so we finished the year Andy, on adjusted gross margin basis which is where we guided to 29% which was below the mid-30s and as we alluded to handful of items contributing to that largely it's mix and it's the Appia core business as well during that period being somewhat adversely impacted by increased investment in RTB [ph] which had negative impact in margins on the quarter but overall again to reiterate Bill's comments, the story hasn’t changed with the ramp of DT Media which carries much higher margins than core Appia as well as our more traditional content business. We’re comfortable and confident today for the full fiscal year reiterating the mid-30s for '16. Andrew D'Silva: Should we assume I guess -- I know you don’t offer quarter by quarter assumptions but is it fair to assume as we ramp up going forward with IQ and Ignite that we should just begin to see a steady increase in margins and probably topping off in the December quarter and is that an assumption that you guys feel comfortable with or am I just looking at it the wrong way?

I think that’s right, as DT Media holistically becomes a greater proportion of our revenue mix, the margin clearly should accrete overtime and as we get into the summer months we will pass graduation and Father's Day here into the summer as well as back to school on the back end we do have some material selling events to sell into and as we discussed 10 new devices with T-Mobile in the next 90 to 120 days and other device launches amongst carriers get us very comfortable that there will be a mix shift away from content into advertising and within advertising more DT Media relative to Core Appia. Andrew D'Silva: Okay, last question for you guys. As far as precisions going with Verizon I mean can you give an update on that -- are you seeing it being useful and is it helping you better deliver the correct content to the right user and have you begun pushing applications now out after phone has been activated through Verizon, my phone recently got a couple new apps installed and I wasn’t sure if that was you guys or someone else?

So we’re about to begin, Andy our precision work. We have been dealing with a variety of issues with Verizon make sure we got all the legal and security and audit and other things associated with that data is that’s absolutely very sensitive that we take seriously and as does Verizon. And so we anticipate that we’re eminent to start beginning that, we have not yet. We think that that will be a material driver of improved yield per device over the long term but we’re going to start here soon and we will have things like age, gender, language preference and so on and that’s something the advertisers really desire off the Ignite platform. Andrew D'Silva: And the pushing applications, you’re not doing that or are you doing that?

Can do that, we’re not pushing applications out to customers at least in the United States after they get their phone but however if you do, do a factory reset or get a software update or something to that effect then the opportunity to push additional application exists but that’s not something -- at this phase of the game that we’re doing actively.

And our next question comes from Bill Sutherland of Emerging Growth Equities. Please go ahead.

With the big roll-out of IQ with T-Mobile coming up, Bill I'm just curious if you could help us think about the some of the economies per user as you get more data on that.

Sure. How I think of the economics per user, we’re going to be putting software across the 100% of user base we will get some percentage of the user base to engage in that and comeback one of the great things of why T-Mobile want to go forward was the stickiness and the engagement of customers continue to come back into the experience more than one-time. How we will think about the product is we will be able to deliver both organic and sponsor app recommendations leveraging the Xyo technology and from an economics perspective you know as we have kind of said before I will give you any specific deals we think about it similar to Ignite is the average -- the average has been around 50:50 rev share with the operator on all the sponsored app installs that a customer pulls down, but I think the real key here is that unlike Ignite where you’ve a customer that gets a phone out of the box and then we have that basically that first 30 days as monetization with IQ will be ongoing, so while the opportunity to monetize that for the life of the device over 12 to 18 months. So while it's not a material driver now as you then get all the users everyday continue to add on, it's kind of like a snow-ball going down a hill in terms of recurring subscriber opportunities and new interfaces in. So, that’s why my comments I referred to the opportunities we think about as fiscal '17 item. But as we have got to get the ramp going here and get this thing on more devices it won't be material in the short term.

Well sort of two follow-ups on that, I guess I'm trying to figure if you guys have enough history yet with the early installs to have a sense of kind of overall life of a phone with a user what the numbers could look like per user, is it just too early to have any data?

Yes we do have some data. I would consider you know one of the things historically, you know Bill we want to do is change the culture of how we approach these kinds of things in the past. I want to have a good empirical data before we start materially baking things into our guidance. I que it's still early days, yes we have got some data but I'm not at a point where I'm comfortable taking that and extrapolating that out and baking it into a huge number of the guidance because I can run the numbers out and they can look really attractive but we’re just not at a point yet where we want to do that, we have made that mistake in the past we’re not going to do it again. So we’re going to be extremely conservative at this point but I do want to hear my optimism and excitement about the long term potential of the product but until we get few good solid quarters under our belt with significant material volumes of devices like we’re now starting to see with Ignite, we don’t want to get over our skews [ph].

Andrew, the guidance for the quarter also reflects kind of the same given the current mix of business, same kind of currency impact that you saw on Q4?

You’re talking about fiscal Q1 guidance?

Right.

Right now we believe that the Aussie [ph] dollar has stabilized again don’t expect it to go down any further, we ended fiscal Q3 on an average of $0.83 and ended fiscal Q4 on average of about $0.78 and we have seen the dollar kind of stabilize in that quarter. So we’re not putting much credence at this point in time in terms of moving around in the range based upon the Aussie dollar number.

And our next question comes from Jon Hickman of Ladenburg. Please go ahead.

I was wondering could you opine a little bit on what you think the percentage of your business from Australia will be in future quarters?

Yes sure. As we look at the content business overall, 74% of the business overall for Digital Turbine was related to content in Q3 and 64% was related to content in Q4. The lion share of that was related to Australia. We do believe though on a relative basis as DT Media becomes much larger percentage of the overall mix that that percentage of content/Australian business will certainly come down. I just want to refer to the comments that we have made previously as it relates to the midpoint of our guidance range of 110 million to a 130 million on the floor that Bill that alluded to Jon in talking about Core Appia's content of 55 million on a trailing 12 months basis and roughly 60 million as we have quoted publicly. In that -- implicit in that is Australian content business as well as Appia core and the remainder of the growth that gets us from roughly 60 million to the midpoint of the guidance range of a 120 million is from DT Media. So, as we continue to track towards our goals of 110 million to 130 million which we reiterated today the proportion of DT Media relative to the whole will increase substantially which will also mute the impact and effect of the Australian dollar and the content business particularly as it relates to overall margin as well.

I guess my question is more of on the if you isolate the content business itself, Australia is still going to be a major factor in that particular segment going forward.

That’s right. Within content that’s correct although we have launched new customers and penetrated existing customers with new products, the Aussie business will continue to be the material driver of content in the near term.

And then could you -- severance cost, what were they in the quarter?

The severance costs were just under a $1.5 million for the executive team in Appia that we took a charge for.

Okay and then by the comment around cost associated with software integration during the quarter, does that mean that you didn’t get paid for the software integration you did or you didn’t do any during?

The revenue was -- yes we didn’t recognize any revenue for the high margin software integration in the quarter relative to revenue that was recognized in Q3. So that’s correct. We did not have any statement of work if you will in fiscal Q4 and that impacted margin as well, revenue end margin.

Okay, so could you explain just one more question for me, I understand the CPA model where you get paid only if a person does the action that’s required by the advertiser. The CPP model could you elaborate on that?

Yes so the CPP is a cost replacement, so rather than having to wait for the customer to do some sort of action like open the app or make a registration or something within the app. The CPP is where the advertiser pays us for a 100% of the apps that we install on the phone. This is really attractive for providers that are taking more advertisers or developers that are A, taking a more long term view versus an immediate term view because they will have that app on the users device for the lifetime of it which averages anywhere from 1 to 2 years and also it works well for brands that want to make sure again that they have got the your mind-share not just for using the app but also in terms of how you can think and interface with that. So, that’s where we are seeing the predominant amount of CPP today. We expect to see that to continue to grow as the app install business for Ignite, it's a little bit different than for example what a Facebook does or what we do on IQ here is immediate term attribution. So it's much more of a branding play given the home screen of the device. So I think that will be a good thing for us as it provides more certainty and visibility in terms of revenue streams since you’re getting paid across the 100% of those. So we want to find the right balance.

So you don’t on a CPP it doesn’t matter if they open it or?

That’s right, we will get it for 100%.

So right now most of your placements are what model?

Right now they are basically, it literally varies from day to day but I would say that we’re probably majority CPI followed by CPP then CPA. We see the model evolving to other things in the futures we’re having conversations with advertisers but those are the three principles today.

And the open rates the 10% to 60% is how is that fluctuated recently? Is that -- I mean I think before you were saying something between like 30 and 50?

And so it really depends on, Jon, the campaign, because the other -- the variable that’s important there is what's the dollar CPI rate. So I would rather have a 25% open rate on $4 CPI than 50% open rate on a $1.50 CPI. So we look at it holistically in terms of what the rate is and we may take a lower open knowing we are going to get a lower open, we have a higher CPI and vice versa, a bit about the campaign and that’s back to the experimentation that we’re doing. And to Andy's question earlier around some of the precision and other data science tools that we’re integrating, on why those will be so important to get both of those numbers moving north.

And then my last one, just how many brands or advertisers -- I don’t know exactly know the right word to use but I think brands is probably the best. Are you installing apps -- over the course of -- I mean what's your count right now?

Yes from an overall Digital Turbine perspective including Appia it's 100s. As I mentioned on 60, it's top 100 Google Play apps today and then all the brands on top of that. From a Digital Turbine media perspective I would say we’re probably working between 25 and 50 today.

And our next question comes from Ilya Grozovsky of National Securities. Please go ahead.

So my question was just first on clarification, what did you say the guidance was for fiscal '16 adjusted EBITDA?

We said that will be positive for the full year now adding back including bonuses. So we can give specific number Illya, it was just reiterating our previous guidance that we would be positive for the entire year now layering on top the new definition of adjusted EBITDA.

And what about -- and the first quarter?

We haven't given any specific adjusted EBITDA guidance on a quarterly basis just on an annual basis today.

Okay, so as far as the new devices go. So obviously Samsung S6 has been fairly successful that’s in this the launch April, mid-April was -- is going to be in your June quarter. Going forward they are really as far as I know aren't any new devices over the next three, four quarters that are going to be coming around that should have that type of an impact. So your guidance and your sort of outlook for the year, is it kind of assuming that you will add additional carriers or are you assuming that the numbers just continue to grow for the devices that are already out there?

So Ilya, it's a few different dimensions. First off, as we go across the devices in the line-up and the older devices get phased out. We typically see is mobile operators will consistently sell similar volumes quarter over quarter of smartphone. So here in the United States if the four major operators average 20 million devices a year, 5 million a quarter just to keep the math simple that’s a pretty consistent metric. So as the new ones come out and the old ones get phased out and we’re on all those new ones, I would expect us to continue to get enough share on that versus betting on okay what's the next big thing that’s going to launch to be a catalyst for us but I think that, you will still continue to see the G3, the M9, the S6, the S6 Edge and the variety of the other one is coming out continue to drive volumes above and beyond this quarter but more importantly they are equally importantly to that will be the yield conversation that we just had but also the expansion of new customers, new markets as well and I touched on that in some of my remarks. So those will all be the catalyst to drive additional top line growth to the category, more so than just one new big device launch that’s happening over the next few months.

This concludes our question and answer session. I would like to turn the conference back over to Mr. Bill Stone for any closing remarks.

Thank you all for joining the call today. We appreciate your support and we will be back in August with our quarterly update to build on the moment that we have today and we appreciate you all joining the call. Thank you very much.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.