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One That Got Away

We hope to get another chance to bring Digital Turbine from the Bullpen to the active portfolio.
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This one got away. Sort of.

Some of you will recall Digital Turbine (APPS) , a Bullpen name for our portfolio. We introduced this name to the Bullpen back in March at the behest of a reader. The shares have been strong all year. Clearly, this should have been a long position, and not merely a placement on the "watch list."

We do go over the Bullpen names with some regularity. What has prodded us to take a look at this name again today, is that these shares have sort of gone the "small cap" version of parabolic this month. In fact, the stock is up rather dramatically this week alone.

To jog some memories, what the company does is deliver end-to-end products and solutions for mobile operators, and advertisers to make easier the monetization of mobile content. One side of the business is known as "Ignite." This is a mobile device management platform. The other side, known a "Discover," is an intelligent application discovery platform. What it does is find the app that the user is looking for, when they don't know precisely what they are looking for. This provides from advertisers, revenue generation.

The company last reported earnings on Aug 5. For its fiscal first quarter, APPS posted adjusted earnings per share of $0.05, a beat of $0.02, and the fourth consecutive quarterly EPS print for this company that landed in positive territory.

Revenue also beat, at $30.55 million (+38.2% year over year). Earnings growth for Digital Turbine has been stable for years now. The numbers behind the headlines are equally impressive.

Numbers Within

First-quarter adjusted EBITDA printed at $4.2 million, up from $200,0000 for the same period a year earlier. Cash provided by operating activities totaled $5 million for the quarter, while free cash flow hit $4.3 million. Gross margin for the quarter posted at 39%, up from 29% last year.

The company installed "Ignite" on 30 million new devices for the quarter, bringing the total number of devices installed to 290 million, while revenue per device increased by 30%, And perhaps this is the most important line item of all, as of the end of the June quarter, Digital Turbine had $16.2 million in cash on the balance sheet, and no debt. That's right. These guys have not borrowed a dime.

Take a Look at This Year

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This one was handed to us. We apologize to the reader that brought this to our attention. This one never should have languished in the Bullpen for so long. That said, the firm is executing very well. We fully intend to grab some for the portfolio if and when the shares approach the 50-day simple moving average, currently $5.51 and rising. We believe it would be irresponsible to just throw money at the name amid recent action at the point of sale, but this name is certainly worthy of investment.

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