APPS — FY2026 Financial Report Analysis

A real operating turnaround, with most of the gain going to lenders

Digital Turbine makes money from apps on Android phones, in two ways. Its On Device Solutions segment pays phone carriers and manufacturers (such as Samsung) to pre-load or recommend apps on new devices, and earns fees from app developers. Its App Growth Platform segment runs an ad exchange that sells ad space inside mobile apps.

In fiscal 2026 (the 12 months to March 31, 2026), revenue rose 15.2% to $565.3 million. The company moved from a $54.1 million operating loss to a $34.0 million operating profit. Net loss still came to $37.7 million, though that is far smaller than the prior year's $92.1 million. The gap between operating profit and net loss is mainly interest: the company refinanced its debt in August 2025 at much higher rates, and interest expense rose 68% to $58.6 million.

At a glance

• Revenue $565.3M, +15.2% — both segments grew, led by the ad exchange (App Growth Platform +21.2%, and +57% in the fourth quarter alone).
• Operating margin 6.0%, from -11.0% — operating margin is the share of revenue left after running the business, before interest and tax. About a third of the improvement came from lower non-cash charges, the rest from better gross profit.
• Interest expense $58.6M, +68% — this is now larger than operating profit. It is why the company still lost money overall despite the turnaround.

The numbers

Segment revenue is before $2.9M (FY2025: $4.4M) of sales between the two segments are eliminated. Gross margin here is revenue minus the share paid to carriers and phone makers and other direct costs, divided by revenue.

What drove the year

The ad exchange carried the growth. In the App Growth Platform, advertising-exchange revenue grew $36.6 million. The 10-K attributes this "largely" to "the continued onboarding of new publishers and demand partners" (more apps selling ad space, more advertisers buying it). Performance and brand advertising fell $2.8 million on "reduced demand in major brands." Growth sped up through the year: fourth-quarter segment revenue was up 57% to $52.1M.

On-device revenue grew on volume overseas. Application media revenue rose $38.3 million. The filing cites "higher device volumes internationally and an increase in revenue-per-device in the U.S. and internationally, offset by lower device volumes in the U.S." Both segments' growth was "primarily driven by improved performance in the Asia Pacific and China regions." In other words, the core US device business saw fewer phones, and the growth came from higher revenue per phone at home plus more phones abroad. Fourth-quarter on-device growth was just 5%.

Margins improved on mix. Revenue share is the cut paid to carriers and phone makers. It fell from 48.0% to 43.1% of revenue. The filing credits "product mix changes, including certain high-margin product lines driving a higher percentage of total net revenue." It also notes the prior year included a one-off $3.8 million contract-related cost. Partly offsetting this, other direct costs rose 36% to $47.0M. The company says that rise comes from a pricing change on the exchange that raised bidding and platform fees but lifted revenue by more.

Operating costs fell, but partly for non-cash reasons. General and administrative expense dropped $31.5M (-18.2%). Of that, $17.1M was lower stock-based compensation and $11.2M was lower depreciation and amortization, "primarily related to certain intangible assets that became fully amortized." Neither reflects the business running more cheaply. Cash incentive pay actually rose. A 2024–25 cost-cutting program, which cost $5.8M in severance and related charges last year, is finished ($0.6M this year). Headcount fell from 647 to 620.

What the headline numbers hide

Operating profit improved $88M; net loss improved only $54M. The difference is debt. The August 2025 refinancing replaced a bank revolver with $430M of term loans from Blue Torch, a private lender. The weighted-average interest rate rose from 8.4% to 11.3%. One tranche carried an effective rate of 20.6% once exit and "duration" fees are counted (fees owed if a tranche is not repaid by set dates). The refinancing also produced a $9.8M loss from writing off the old loan's costs, and $1.8M of other financing-related fees. Taxes were a $6.4M expense even though the company had a pre-tax loss. The 10-K blames foreign tax rate differences and a valuation allowance, an accounting reserve against tax losses the company may never be able to use.

The "adjusted" profit is much rosier than GAAP. Non-GAAP adjusted net income was $64.9M ($0.56 a share), against a GAAP net loss of $37.7M. The $102.6M gap includes:

• $41.6M of amortization of acquired intangibles;
• a $21.6M "tax adjustment" for the valuation allowance;
• $16.4M of stock compensation;
• $13.9M of non-cash interest (debt discount, issuance costs and exit/duration fees);
• the $9.8M debt write-off.

The company redefined its non-GAAP measures this year to exclude non-cash interest and restated the prior year to match. The exit and duration fees are added to the loan principal, so they will eventually be repaid in cash.

Cash conversion improved, but free cash flow is thin. Operating cash flow rose to $41.8M from $11.9M. After $30.6M of capital spending (mostly software development), non-GAAP free cash flow was $11.8M, versus -$9.5M a year earlier. That is small next to $391.2M of secured debt and $37.7M of cash at year-end. Cash paid for taxes jumped to $26.3M from $7.2M, and interest paid rose to $47.1M from $35.6M. The fourth quarter alone had negative free cash flow of $3.0M.

Receivables grew much faster than sales. Accounts receivable (money owed by customers) rose 38% to $251.2M, while revenue grew 15%. One customer accounted for 20.6% of receivables at year-end; a year earlier no customer exceeded 10%. The company does not name the customer. Its effect on cash was mostly offset because Digital Turbine also owed more: accrued revenue share (payments due to carriers and phone makers) rose from $35.3M to $87.2M. This looks like timing, not a collection problem. Still, it means operating cash flow depended on paying partners later, which cannot repeat indefinitely.

Shareholders were diluted to pay down debt. The company sold 9.9 million new shares at an average $5.89 through an at-the-market offering (selling shares gradually on the open market), raising $58.6M gross to prepay loans. It also issued lenders warrants (rights to buy shares) for 1.22 million shares at $4.84. Weighted average shares rose 8.8%, to 112.9M. The narrower per-share loss came from the business improving, not from buybacks or a lower tax bill.

Takeaway: Digital Turbine's operations turned around in fiscal 2026: gross margin up 3.6 points, an operating profit after a large loss, and the ad exchange growing more than 20%. But almost all of that improvement went to lenders, because the August 2025 refinancing pushed interest above operating profit. Net income depends less on selling more apps or ads than on refinancing roughly $390M of expensive debt.

Outlook

In May, management guided fiscal 2027 revenue of $630–650M (+11–15%) and adjusted EBITDA of $135–145M. Adjusted EBITDA is earnings before interest, tax, depreciation and amortization, also excluding stock pay and one-offs. On August 4, 2026, after a strong first quarter (revenue $166.0M, +27%; App Growth Platform +56%), the company raised that guidance to $650–670M revenue and $145–155M adjusted EBITDA. GAAP net loss in that quarter narrowed to $3.2M, from $14.1M a year earlier.

Debt has not yet been refinanced. The Q1 fiscal 2027 10-Q shows $387.8M of secured debt still outstanding at June 30, 2026. Exit and duration fees of $5.85M and $10.75M have now been added to the principal. Another $5.0M duration fee is due if a tranche remains unpaid at December 31, 2026. On October 1, 2026, the company registered 1,222,418 shares for resale by selling stockholders. That is exactly the number covered by the lender warrants, so expect those shares to become sellable.

Our read: the operating trend is real and has continued into fiscal 2027. GAAP profitability depends on two things: a refinancing at a materially lower rate, and on-device growth broadening beyond Asia-Pacific while US device volumes fall. Three things to watch:

1. Whether a refinancing lands before the December 31, 2026 fee date.
2. Whether receivables concentration with that single customer persists.
3. Whether free cash flow can reach the scale of adjusted EBITDA once higher cash tax and interest payments are counted.