APPS

Digital Turbine is a real turnaround in motion, not yet a clean one. After three straight years of shrinking revenue ($748M FY22 → $491M FY25), FY2026 revenue re-accelerated to $565M (+15.2%), gross profit grew faster than revenue (+26%, gross margin 56.9%), and operating income swung to a positive $34.0M (+163%). Crucially, the loss is funded by operations now: operating cash flow jumped to $41.8M (+252%) against $30.6M capex, so the business is finally self-funding. The MD&A shows the margin lever is real cost discipline — G&A fell 18.2% to $142M and sales & marketing fell 5.9% — while revenue share (the largest cost) rose only 3.5% on 15% revenue growth, meaning incremental dollars are dropping through. That is the profile of an operating-leverage recovery.

The reason this is a hold and not a buy is the balance sheet and the financing overhang, which the filing lays out plainly. The August 2025 Blue Torch refinancing put $430M of variable-rate term loans secured by 'substantially all of the assets' on the books, and the company already had to amend it on April 20, 2026 to cut the liquidity covenant from $20M to $15M — a tell that liquidity is tight against just $37.7M of cash. Leverage is heavy (long-term debt $354M, liabilities/equity 3.38x) and interest expense floats with rates. Management is plugging the gap with equity: the ATM sold 9.9M shares at an average $5.89, and shares outstanding rose 12.8% YoY, plus warrants struck at $4.84. With the stock up 16.6% today to $12.91 — roughly double the ATM price — the market is already paying up for the recovery the numbers just confirmed.