Small Caps Stocks Uncategorized

Digital Turbine (APPS): Everything is Bigger and Better in Texas

A Small Cap Technology Company with potential 40%+ Revenue Growth in 2021

The Financials

I’ll be frank. The company itself has its risks. The financials though and the setup for the next year are hypnotizing me into a false sense of security.

They have the revenue growth of a small tech company and the profitability that many of these upstarts so glaringly lack.

(The 2020 fiscal year for Digital Turbine ended on March 31st)

201820192020
Revenue ($)75104139
Gross Margins33.5%34.3%38.7%
Operating Margins-7.8%3.3%9.5%
Earnings ($)-53-614
Operating Cash Flow (S)7131
Free Cash Flow ($)5-127
All values in Millions of Dollars, besides percents because that wouldn’t make sense

In 2018 the numbers sucked, no doubt.

However in 2020, Digital Turbine had a great deal of positives:

  • Revenues increased 33.65% Y/Y
  • Earned $.16 per share. This will undoubtedly increase drastically next year with the revenue and margin growth together
  • Increased reoccurring revenue to 30% versus 5% the previous year
  • Added 150 million devices to their network, now totaling 400 million devices

In addition, 2020 only included one month of Mobile Posse’s content revenue.

The Mobile Posse Aquisition

Digital Turbine bought this content/media business for $66 million. $24.5 million was financed with loans and the other $41.5 is being paid from forward profits and existing cash.

I like the acquisition. The company added just under $5 million in revenues for just one month in 2020. This implies at least $60 million in 2021 revenues. That alone will cause massive revenue growth that ignores all the organic growth that will come from the Digital Turbine platform. Also take into account, Mobile Posse has gross margins of over 50% and Digital Turbine’s were around 39% in 2020. That means that margins will continue to expand in the near term and revenues will increase. If you add onto the fact that each company can sell to each’s existing customer base…It can turn out to be a very fruitful year for the company.

Beginning Of A Beautiful Friendship GIFs | Tenor
Thanks Casa Blanca for providing me that

Forward Looking

It’s hard to define exactly how the company will do in 2021. Management said to expect between $47 and $50 million in Q1 2021. This implies that you can easily expect another 30%+ revenue growth year ahead. Earnings will undoubtedly outpace revenue, due to the scalable nature of the platform. Take into account Mobile Posse is adding $60 million in revenue alone, it could be an explosive year for Digital Turbine stock.

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