Digital Turbine Inc

Note 6—Goodwill and Intangible Assets

Changes in the carrying amount of goodwill by segment follows:

The Company evaluates goodwill for impairment at least annually or upon the occurrence of events or circumstances that indicate they would more likely than not reduce the fair value of a reporting unit below its carrying value. During the year ended March 31, 2025, the Company sustained a decline in its forecasted operating trends, which was identified as a potential indicator of impairment for the Company’s AGP reporting unit. As a result, the Company performed a quantitative goodwill impairment evaluation over its reporting units ODS and AGP to determine if their respective fair values were below their carrying values. Based on the evaluation, the Company determined that neither reporting unit was impaired, andno impairment of goodwill was recognized for either the ODS or AGP reporting unit during the fiscal year 2025.

During the fiscal year ended March 31, 2024, the Company sustained a decline in the quoted market price of the Company’s common stock, an increase in interest rates, and the Company’s forecasted operating trends, which represented potential indicators of impairment related to the goodwill assigned to the AGP reporting unit for the three months ended September 30, 2023. The Company also performed its annual goodwill impairment evaluation as of March 31, 2024, noting continued trends in quoted market price, interest rates, and the Company’s forecast. As a result of these reviews, the Company recorded a $147,181 and $189,459 non-deductible, non-cash goodwill impairment charge, respectively, for a total of $336,640 to the AGP reporting unit during the fiscal year ended March 31, 2024. There wasno impairment of goodwill for the ODS reporting unit during the year ended March 31, 2024.

For both of the goodwill impairment evaluations performed during theyears ended March 31, 2025 and March 31, 2024, the fair value of each reporting unit was estimated using a weighted combination of the income approach, which incorporates the use of the discounted cash flow method, and the market approach. The Company’s interim and annual testing reflected a 75%/25% allocation between the income and market approaches. In both years, the Company believed the 75% weighting to the income approach to be appropriate, as it directly reflects its future growth and profitability expectations.

The discounted cash flow method requires significant assumptions and estimates, the most significant of which are projected future growth rates, capital expenditures, tax rates, gross margins and terminal values. In addition, the Company determines its weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested. For both impairment evaluations performed at March 31, 2025 and March 31, 2024, respectively, the Company reduced its estimated future cash flows, including revenues, gross profits, and EBITDA, relative to the previous evaluation, to reflect its best estimates at this time. In each evaluation the Company also updated key inputs for the discounted cash flow models, including weighted-average cost of capital, which incrementally decreased due to lower equity risk premium and the company specific premium.

The market approach estimates the fair value of the reporting unit by applying multiples of operating performance measures to the reporting unit’s operating performance. These multiples are derived from comparable publicly-traded companies with similar investment characteristics. For the March 31, 2025 impairment evaluation, as compared to the March 31, 2024 evaluation, the Company increased its EBITDA market multiples, reflecting increasing valuations across the Company’s selected peer group. The results of these updates, along with those made to the discounted cash flow models described above, indicated that the carrying value of each reporting unit did not exceed its respective fair value.

Intangible Assets

Finite-lived intangible assets 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. Based on the analysis performed, no impairment was identified during the three and twelve months ended March 31, 2025 or the fiscal year ended March 31, 2024.

The components of intangible assets were as follows as of the periods indicated:

During the fiscal years ended March 31, 2025, 2024, and 2023, the Company recorded amortization expense of $55,612, $64,358, and $64,608, respectively, in general and administrative expenses on the consolidated statements of operations and comprehensive (loss) income.

During the first quarter of fiscal year 2025, certain fully amortized intangible assets of approximately

$31,000 were eliminated from gross intangible assets and accumulated amortization, with no corresponding impact to the income statement.

Estimated amortization expense in future fiscal years is expected to be:

Note 7—Accounts Receivable

Billed accounts receivable represent amounts billed to customers for which the Company has an unconditional right to consideration. Unbilled accounts receivable represent revenue recognized but billed after period-end. All unbilled receivables as of March 31, 2025 are expected to be billed and collected (subject to the allowance for credit losses) within twelve months.

The Company considers various factors, including credit risk associated with customers. To the extent any individual debtor is identified whose credit quality has deteriorated, the Company establishes allowances based on the individual risk characteristics of such customer. The Company makes concerted efforts to collect all outstanding balances due, however account balances are charged off against the allowance when management believes it is probable the receivable will not be recovered.

Allowance for Credit Losses

The Company maintains reserves for current expected credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, current economic trends, and changes in customer payment patterns to evaluate the adequacy of these reserves.

The Company considers a receivable past due when a customer has not paid by the contractually specified payment due date. Account balances are written off against the allowance for credit losses if collection efforts are unsuccessful and the receivable balance is deemed uncollectible (customer default), based on factors such as customer credit assessments as well as the length of time the amounts are past due.

Changes in the allowance for credit losses on trade receivables were as follows:

The Company recorded $2,767, $3,202, and $3,342 of credit loss expense during the years ended March 31, 2025, 2024, and 2023, respectively, in general and administrative expenses on the consolidated statements of op erations and comprehensive (loss) income.

Note 8—Property and Equipment

Depreciation expense for the years ended March 31, 2025, 2024, and 2023, was $27,298, $19,504, and $16,465, respectively.

During the years ended March 31, 2025, 2024, and 2023, depreciation expense includes $27,089, $15,459, and $10,190, respectively, related to internal-use assets included in general and administrative expense and $209, $4,045, and $6,275, respectively, related to internally-developed software to be sold, leased, or otherwise marketed included in other direct costs of revenue.

During the years ended March 31, 2025, 2024, and 2023, the Company did not write down any computer software balances to net realizable value.

Note 9—Leases

The Company has entered into or assumed through acquisitions, various non-cancellable operating lease agreements primarily for office space. These lease agreements expire between fiscal years 2026 and 2030 and, in certain cases, includeone or more options to renew. The Company recognizes a right-of-use (“ROU”) asset and lease liability at the lease commencement date based on the estimated present value of lease payments over the lease term. Variable lease payments consisting of non-lease component and services are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation is incurred.

Leases are classified on the balance sheet as follows:

The current portion of the Company’s lease liabilities, payable within the next twelve months, is included in other current liabilities, and the long-term portion of the Company’s lease liabilities is included in other non-current liabilities on the consolidated balance sheet.

Schedule, by fiscal year, of maturities of lease liabilities as of:

During the years ended March 31, 2025, 2024, and 2023, expenses related to operating leases were $5,544, $4,953, and $6,854, respectively, and were included in operating expenses.

Note 10—Other Current Liabilities

Other current liabilities consisted of the following:

Note 11—Other Non-Current Liabilities

Other noncurrent liabilities consisted of the following:

On a quarterly basis, the Company performs an assessment on the fair value of its contingent consideration associated with the Company’s acquisition of In App Video Services UK LTD. During the year ended March 31, 2025, the Company reassessed the fair value of its contingent consideration based on current forecasts. Based on the purchase agreement, executed on November 1, 2022, consideration included potential annual earn-out payments based on meeting annual revenue targets for the calendar years ended December 31, 2022, 2023, 2024, and 2025. The annual earn-out payments are up to $250 for the year ended December 31, 2022, and $1,000 for each of the calendar years ended December 31, 2023, 2024, and 2025. Also, an incremental earn-out payment will be made for each of the calendar years ended 2023, 2024, and 2025 in an amount equal to 25% of revenue that is more than 150% of that calendar year’s revenue target.

As a result of the Company’s assessments during the year ended March 31, 2025, a remeasurement loss equal to the change in fair value of $300 was recorded.

During the fiscal year ended March 31, 2025, In App met the 2024 calendar achievement threshold and will receive a payout of approximately $1,000 in the first quarter of fiscal year 2026 and is included in other current liabilities. During the fiscal year ended March 31, 2024, the Company 1) paid approximately $1,100 for the earn-out associated with the calendar year ended December 31, 2023 and 2) recognized a change in the fair value of contingent consideration of $372. Changes in the fair value of the earn-out liability subsequent to the acquisition date are recognized in the consolidated statements of operations and comprehensive (loss) income.

Note 12—Debt

The following table summarizes borrowings under the Company’s debt obligations and the associated interest rates:

Debt obligations on the consolidated balance sheets consist of the following:

Revolver

On February 3, 2021, the Company entered into a credit agreement (the “Credit Agreement”) with Bank of America, N.A. (“BoA”), which provided for a revolving line of credit (the “Revolver”) of up to $100,000 with an accordion feature enabling the Company to increase the total amount up to $200,000.

On April 29, 2021, the Company amended and restated the Credit Agreement (the “Amended and Restated Credit Agreement”) with BoA, as a lender and administrative agent, and a syndicate of other lenders, which provided for a revolving line of credit of up to $400,000. The revolving line of credit matures on April 29, 2026, and contains an accordion feature enabling the Company to increase the total amount of the Revolver by $75,000 plus an amount that would enable the Company to remain in compliance with its consolidated secured net leverage ratio, on such terms as agreed to by the parties. The Amended and Restated Credit Agreement was subsequently amended as follows:

•First Amendment: Increase in the Revolver to $525,000 while retaining the $75,000 accordion feature discussed above, for a total potential revolving line of credit of $600,000 on December 29, 2021.

•Second Amendment: LIBOR was replaced with the Term Secured Overnight Financing Rate (“SOFR”). As a result, borrowings under the Amended and Restated Credit Agreement where the applicable rate was LIBOR will accrue interest at an annual rate equal to SOFR plus between 1.50% and 2.25% beginning on the effective date of the Second Amendment, which was October 26, 2022.

•Third Amendment: On February 5, 2024, the maximum consolidated secured net leverage covenant and the minimum consolidated net interest coverage covenant were amended. In addition, it increased the limit of permitted, other investments, including equity investments and joint ventures from $20,000 in the aggregate in any fiscal year of the Company to $75,000 and increased the annual interest rate to SOFR plus between 1.50% and 2.75%, based on the Company’s consolidated secured net leverage ratio.

•Fourth Amendment: On August 6, 2024, the maximum consolidated secured net leverage covenant and the minimum consolidated net interest coverage covenant were amended. Additionally, the Revolver was reduced by $100,000 to $425,000 (while retaining the $75,000 accordion feature), and the annual interest rate for the highest leverage ratio results was increased to SOFR plus between 1.00% and 3.75%, based on the Company’s consolidated leverage ratio. The Fourth Amendment also provided for payment against the outstanding Revolver balance to the extent the Company holds unrestricted cash in excess of $40,000, and reduced the permitted investments threshold limit from $75,000 to $25,000.

Other than the changes described above regarding the covenants in the Fourth Amendment, the amendments discussed made no other changes to the terms of the Amended and Restated Credit Agreement, which contains customary covenants, representations, and events of default and also requires the Company to comply with a maximum consolidated secured net leverage ratio and minimum consolidated interest coverage ratio.

The Company incurred debt issuance costs of $6,564 for the Amended and Restated Credit Agreement, inclusive of costs incurred for the First, Second, Third and Fourth Amendments. Deferred debt issuance costs are recorded as a reduction of the carrying value of the debt on the consolidated balance sheets. All deferred debt issuance costs are amortized on a straight-line basis over the term of the loan to interest expense.

As of March 31, 2025, the Company had $411,000 drawn against the Amended and Restated Credit Agreement, classified as long-term debt on the consolidated balance sheets, with remaining unamortized debt issuance costs of $2,313.

As of March 31, 2025, amounts outstanding under the Amended and Restated Credit Agreement accrue interest at an annual rate equal to, at the Company’s election, (i) SOFR plus between 1.50% and 3.75%, based on the Company’s consolidated secured net leverage ratio, or (ii) a base rate based upon the highest of (a) the federal funds rate plus 0.50%, (b) BoA’s prime rate, or (c) SOFR plus 1.00% plus between 0.50% and 2.75%, based on the Company’s consolidated secured leverage ratio. Additionally, the Amended and Restated Credit Agreement is subject to an unused line of credit fee between 0.15% and 0.35% per annum, based on the Company’s consolidated leverage ratio. As of March 31, 2025, the interest rate was 8.17% and the unused line of credit fee was 0.35%.

The Company’s payment and performance obligations under the Amended and Restated Credit Agreement and related loan documents are secured by its grant of a security interest in substantially all of its personal property assets, whether now existing or hereafter acquired, subject to certain exclusions. If the Company acquires any real property assets with a fair market value in excess of $5,000, it is required to grant a security interest in such real property as well. All such security interests are required to be first priority security interests, subject to certain permitted liens.

As of March 31, 2025, the Company had $14,000 available to draw on the revolving line of credit under the Amended and Restated Credit Agreement, excluding the accordion feature, subject to the required covenants. As of March 31, 2025, the Company was in compliance with all covenants. The fair value of the Company’s outstanding debt approximates its carrying value.

Interest expense, net

Interest expense, net, amortization of debt issuance costs, and unused line of credit fees were recorded in interest expense, net, on the consolidated statements of operations and comprehensive (loss) income, as follows:

Note 13—Stock-Based Compensation

2020 Equity Incentive Plan of Digital Turbine, Inc. (the “2020 Plan”)

On September 15, 2020, the Company’s stockholders approved the 2020 Plan, pursuant to which the Company may grant equity incentive awards to directors, employees and other eligible participants. The 2020 Plan became effective on September 15, 2020, and has a term often years. A total of 12,000,000 shares of common stock were reserved for grant under the 2020 Plan. The types of awards that may be granted under the 2020 Plan include incentive and non-qualified stock options, stock appreciation rights, restricted stock, and restricted stock units. Stock options may be either incentive stock options, as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), or non-qualified stock options.

On August 27, 2024, our stockholders approved an amendment to the 2020 Plan to increase the number of shares of common stock reserved for issuance thereunder by 8,560,000 shares, from 12,000,000 shares to 20,560,000 shares and to make certain other changes. As of March 31, 2025,6,106,862 shares of common stock were available for issuance as future awards under the 2020 Plan.

Stock Options

Stock options are granted with an exercise price no lower than the fair market value at the grant date. They typically encompass a vesting period oftwo tothree years and a contractual term often years. Share-based compensation expense for stock options is recognized on a straight-line basis over the requisite vesting period, determined by the grant-date fair value for the portion of the award expected to vest. The Company employs the Black-Scholes options-pricing model to estimate the fair value of its stock options. The Company may issue either new shares or treasury shares upon exercise of these awards.

The following table summarizes stock option activity:

At March 31, 2025, total unrecognized stock-based compensation expense related to unvested stock options, net of estimated forfeitures, was $7,005, with an expected remaining weighted-average recognition period of 2.04 years.

Restricted Stock

Awards of restricted stock units may be either grants of time-based restricted stock units (“RSUs”) or performance-based restricted stock units (“PSUs”) that are issued at no cost to the recipient. The stock-based compensation expense for these awards is determined using the fair market value of the Company’s common stock on the date of the grant. No capital transaction occurs until the units vest, at which time they are converted to restricted or unrestricted stock. Compensation expense for RSUs with a time condition is recognized on a straight-line basis over the requisite service period. The Company periodically grants PSUs to certain key employees that are subject to the achievement of specified internal performance metrics over a specified performance period. The terms and conditions of the PSUs generally allow for vesting of the awards ranging between forfeiture and up to 200% of target. Stock-based compensation expense for PSUs with a performance condition are recognized on a straight-line basis based on the most likely attainment scenario over the performance period. The most likely attainment scenario is re-evaluated each period.

Restricted stock awards (“RSAs”) are awards of common stock that are legally issued and outstanding. RSAs are subject to time-based restrictions on transfer and unvested portions are generally subject to a risk of forfeiture if the award recipient ceases providing services to the Company prior to the lapse of the restrictions. The stock-based compensation expense for these awards is determined using the fair market value of the Company’s common stock on the date of the grant. The RSAs have time conditions and in some cases, once the stock vests, the individual is restricted from selling the shares of stock for a certain defined period, from three months toone year, depending on the terms of the RSA.

The following table summarizes RSU, PSU, and RSA activity:

At March 31, 2025, total unrecognized stock-based compensation expense related to RSUs, PSUs and RSAs, net of estimated forfeitures was $20,179, with an expected remaining weighted-average recognition period of 1.58 years.

Valuation of Awards

For stock options granted, the Company uses the Black-Scholes option pricing model to estimate the fair value of stock options at grant date. The Black-Scholes option pricing model incorporates various assumptions, including volatility, expected term, risk-free interest rates, and dividend yields. The assumptions utilized in this model during fiscal years 2025, 2024, and 2023 are presented below.

Total fair value of options vested and total intrinsic value of options exercised was as follows for the fiscal years presented:

Stock-Based Compensation Expense

Stock-based compensation expense for the years ended March 31, 2025,2024, and 2023, was $33,543, $33,763, and$30,401, respectively, and was recorded within general and administrative expenses onthe consolidated statements of operations and comprehensive (loss) income.

Note 14—Earnings per Share

Basic net (loss) income per share is computed based on the weighted average number of shares of common stock outstanding during the period. Diluted net (loss) income per share is computed based on the weighted average number of common shares outstanding plus the effect of potentially dilutive common shares outstanding during the period using the applicable methods. The Company excludes equity instruments from the calculation of diluted earnings per share if the effect of including such instruments is antidilutive.

The following table sets forth the computation of basic and diluted net (loss) income per share of common stock (in thousands, except per share amounts):

Potentially dilutive outstanding securities of 7,760,981,4,405,087, and 1,390,650 for the years ended March 31, 2025, 2024, and 2023, respectively, were outstanding but were excluded from the computation of diluted net income per share because their effect would have been anti-dilutive.

Note 15—Income Taxes

The components of the Company’s income tax provision (benefit) attributable to operations are as follows:

(Loss) income before income taxes included (loss) income from domestic operations of $(109,128), $(170,057), and $(6,801) for the years ended March 31, 2025, 2024, and 2023, respectively, and (loss) income from foreign operations of $21,264, $(235,074) and $28,817 for the years ended March 31, 2025, 2024, and 2023, respectively.

A reconciliation of income tax expense using the statutory U.S. income tax rate compared with the actual income tax provision follows:

ASC 740 requires the consideration of a valuation allowance, on a jurisdictional basis, to reflect the likelihood of realization of deferred tax assets. Significant management judgment is required in determining any valuation allowance recorded against deferred tax assets. A net tax expense of $29,551 was realized in the fiscal year ended March 31, 2025, as a result of changes in the valuation allowance. A valuation allowance of $85,403 was recorded against deferred tax assets as of March 31, 2025.

A net tax expense of $29,010 was realized in the fiscal year ended March 31, 2024, as a result of changes in the valuation allowance. A valuation allowance of $55,852 was recorded against deferred tax assets as of March 31, 2024.

Deferred income tax assets and liabilities consist of the following:

The following details the scheduled expiration dates of the Company’s net operating loss (NOL) carryforwards:

The Company’s income is subject to taxation in both the U.S. and foreign jurisdictions. Significant judgment is required in evaluating the Company’s tax positions and determining its provision for income taxes. The Company establishes liabilities for income tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These liabilities for tax contingencies are established when the Company believes that a tax position is not more likely than not sustainable. The Company adjusts these liabilities in light of changing facts and circumstances, such as the outcome of a tax audit or lapse of a statute of limitations. The provision for income taxes includes the impact of uncertain tax liabilities and changes in liabilities that are considered appropriate.

The Company has not provided for deferred taxes on approximately $62,669 of undistributed earnings from foreign subsidiaries as of March 31, 2025. The Company has not provided for any additional deferred taxes with respect to items such as foreign withholding taxes, state income tax, or foreign exchange gain or loss that would be due when cash is repatriated to the U.S. because those foreign earnings are considered permanently reinvested in the business or may be remitted substantially free of any additional taxes. Because of the various avenues to repatriate the earnings, the determination of the amount of the unrecognized deferred tax liability related to the undistributed earnings, if eventually remitted, is not practicable.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended March 31, 2025, 2024, and 2023, is as follows:

Included in the net deferred income tax assets (liabilities) balances at March 31, 2025, 2024, and 2023, on our consolidated balance sheets are $2,532, $2,168, and $2,024, respectively, of unrecognized tax benefits, which would affect the annual effective tax rate if recognized. The Company recognized $227, $232, and $44 for interest and penalties on uncertain income tax liabilities in income tax expense for the years ended March 31, 2025, 2024, and 2023, respectively. The Company does not expect the amount of unrecognized tax benefits to change significantly in the next twelve months.

The Company’s U.S. federal, state, and foreign income tax returns generally remain subject to examination for the tax years ended 2020 through 2025.

Note 16—Transformation Program Activities

In October 2024, the Company began a transformation program intended to improve various measures across the organization. These measures include but are 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, we implemented atwo-phased reduction in our workforce, one in November 2024 and the other in January 2025. The transformation program includes a number of other initiatives that are underway, and the Company expects the transformation program to be substantially completed by the first quarter of fiscal year 2026.

During the year ended March 31, 2025, the Company incurred expenses of $2,886 related to our transformation program, which related specifically to severance costs. These aggregate pre-tax charges are primarily cash-based and consist of severance and other one-time termination benefits. The following table summarizes the severance costs related to the Company’s transformation program for the twelve months ended March 31, 2025:

The severance charges reflected in the table above were recorded in either product development, sales and marketing, or general administrative expenses on the consolidated statements of operations and comprehensive (loss) income based on the nature of the specific, related costs.