Digital Turbine Inc (APPS) 2019 Q2 法說會逐字稿

Good day, and welcome to the Digital Turbine Fiscal 2019 Second Quarter Results Conference Call. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to Brian Bartholomew, Senior Vice President, Capital Markets and Strategy. Please go ahead.

Thank you, Sean. Good afternoon, and welcome to the Digital Turbine Second Quarter Fiscal 2019 Earnings Conference Call. Joining me on the call today, to discuss our results are Bill Stone, CEO; and Barrett Garrison, our CFO.

Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements. These forward-looking statements are based on our current assumptions, expectations and beliefs, including projected operating metrics, future products and services, anticipated market demand and other forward-looking topics. Although we believe that our assumptions are reasonable, they are not guarantees of future performance and some will inevitably prove to be incorrect. Except as required by law, we undertake no obligation to update any forward-looking statements. For a discussion of the risk factors that could cause our actual results to differ materially from those contemplated by our forward-looking statements, please refer to the documents we file with the Securities and Exchange Commission.

Also during this call, we will discuss certain non-GAAP measures of our performance. Non-GAAP measures are not substitutes for GAAP measures. Please refer to today's press release for important information about the limitations of using non-GAAP measures as well as reconciliations of these non-GAAP financial results to the most comparable GAAP measures. With that, I will now turn the call over to Mr. Bill Stone.

Thanks, Brian, and thanks to all for joining us today. Our stated goal has been to build and sustain a profitable growth business. We grew revenues 50% year-over-year in the September quarter, and this growth, along with sequential improvements in gross and operating margins, enabled us to generate more than $1.6 million in adjusted EBITDA during the quarter, marking our sixth consecutive quarter of positive adjusted EBITDA. We also generated $1.6 million in free cash flow during the September quarter. And as pleased as I am with this financial performance, I'm even more excited about the traction of our platform. We continue to see the strategic value of the platform grow, with several new and renewal agreements signed over the past few months with blue-chip names such as Verizon, AT&T, Samsung and Netflix.

I'm going to break out my prepared remarks into 3 areas. First is some commentary about these new agreements; secondly, some operational commentary about both the September quarter and the current December quarter; and finally, some commentary about our future growth drivers and progress against them as we enter into 2019.

I'm pleased to announce that we recently signed a number of new multiyear deals. First, our new AT&T agreement matches the existing terms of the prior agreement and in addition, we have some enhanced margin terms for new products that are addendums to this existing agreement. We also anticipate additional enhanced margin opportunities as we get into 2019 as we work with AT&T on various integration opportunities with the Time Warner assets.

Secondly, we signed a multiyear global deal with Samsung to integrate our mobile delivery platform on Samsung devices. I'll provide additional details on the agreement later in my remarks, but it's a great validation of both our platform and our long-term strategy. And finally, I'm pleased to announce a global agreement with Netflix that will have Digital Turbine distributing the Netflix application with various operators and OEMs around the globe.

We've already started this agreement with a large North American operator and it is a revenue share where we get paid a portion of the revenues that Netflix generates from new subscriptions. Combined with our recently announced new 4-year Verizon agreement, I'm very excited about how the combination of renewing our existing partners plus adding new ones demonstrates the value-add we bring to these high-profile companies.

Turning to the September quarter. We finished with $23.9 million in revenue, which represents 50% growth, compared to the September quarter last year and $1.6 million in adjusted EBITDA. Barrett will provide more color on the financials, but from an operational perspective, I was pleased with the progress we made on growing our product diversification. The contribution of our new product such as Single-Tap, folders, post-install actions and our out-of-the-box Setup Wizard are beginning to make a more material impact.

A year ago, 97% of our O&O revenues were from our dynamic install product. And while that dynamic install product grew 30% year-over-year, as a percentage of total revenues, the new products have grown from 3% to 17% of revenues reflecting incremental contribution being generated from the broader platform. Combined with improvements in advertiser demand, this resulted in improvements in revenue per device, or RPD. And while device volumes may fluctuate and are not 100% in our control, revenue per device is a fundamental health metric of our business as it showcases how much we can earn from each device once we embed the Digital Turbine mobile delivery platform on it.

RPD for the quarter was $0.96 compared to $0.73 a year ago, representing a 32% increase. And here in the United States, RPD for the quarter was approximately $2, representing an increase of over 60% from the same period last year. We will continue to encourage investors to pay close attention to this operating metric.

Turning to the current December quarter. We are very pleased to see opportunities for continued growth in our 3 growth levers of devices, products and media. On devices, we are now live with many new partners such as TracFone, Panasonic, Carbon, Intex and others that are generating growth that was not present in the December quarter last year. The combination of these new devices plus the improvements in revenue per device help offset any macro U.S. device softness. And also América Móvil had some technical operational improvements that we anticipate will be implemented during this quarter that should continue to improve performance in that account, and we are already seeing revenue growth in that account with improved advertiser demand and remain optimistic about the partnership.

On new products, we have launched Single-Tap across our large North American partners and are scaled with one of them and in progress of getting to scale with the other one. Other new products such as folders, Post-Install Actions and Wizard are also poised for growth.

On the media side, we already have tens of millions of dollars of insertion orders signed for the holiday season. While there are no guarantees that all these insertion orders will run, as it's dependent upon many factors, such as partner, device make and model, performance and so on. The demand is nevertheless strong, as Digital Turbine is the #3 distributor of Android applications in the United States, only trailing Facebook and Google.

I have also been pleased at the increasing diversification of the types of applications we are delivering. While we are seeing growth in aggregate gaming revenues, as a percentage of total revenues, we are seeing much faster revenue growth from brands and other non-gaming applications from companies such as LinkedIn, Starbucks, eBay, Yelp and many others. These non-gaming revenues were 46% of revenues in 2016, 60% in 2017 and 68% of our revenues year-to-date in 2018. In particular, brand revenues are now over 50% of our advertising demand.

And finally, we are also seeing our efforts from recurring revenue streams on our revenue share applications with companies such as Netflix, The Weather Channel, Yahoo!, Amazon and others compared to CPI or CPP models and that's beginning to make a noticeable impact on our results, which is encouraging.

Now turning to the future, I want to provide some commentary on how 2019 is shaping up across our growth levers. First on devices. I want to provide additional details with our new global agreement with Samsung. We are proud to be partnering with Samsung, the largest global supplier of smartphones that sells hundreds of millions of devices per year. Including Apple, 1 in 5 smartphones sold in the world today is a Samsung device. Our agreement enables our mobile delivery platform to be integrated across Samsung devices. Technically, we are in the process of launching a solution with TracFone here in the United States and are in the planning phases of joining forces with Samsung on pursuing new global operators that do not currently have the Digital Turbine solution as well as planning geographies to pursue with Samsung's open-market devices.

This agreement is validation of our platform and the value-add we bring. And while Samsung is the largest smartphone supplier, there are still more than 700 million Android devices that get sold per year from other OEMs. Our pipeline continues to be encouraging with numerous other well-known Asian OEM brands deep in the pipeline process. We also continue to receive inbound interest from operators and OEMs and how we can use the Digital Turbine platform for devices beyond smartphones and are in the planning phases of how to expand that into other devices in 2019. The overall platform strategy starts with getting our software on device, so this operational progress is a nice executional proof point against the broader company strategy.

On products, 2019 will all be about scaling the existing products while also launching our bring your own device, or BYOD, product to the market. Currently, operators don't have a good solution on how to deliver their branded experience to their customers when a device is not directly sold by them. In most of the world, this is how devices are distributed, so it's a pain point. As we grow our device base now into the hundreds of millions, being able to deliver a customized experience out-of-the-box for operator subscribers is a tremendous market opportunity.

To that end, I'm pleased that we've reached an agreement with Reliance Jio in India that will enable us to start monetizing these open-market devices with Jio's applications at first boot. We expect the margins for the BYOD product to be materially better than our other products and we'll be using Jio as a first operator partner for this new product with many more global operators in the pipeline that we anticipate launching in 2019.

And finally on media. 2019 is all about we scale our efforts more efficiently within 3 distinct categories. First is brands, and we have third-party partnerships with advertising agencies that allow us to bring their brands and relationships to our O&O partners. We are working on expanding more of these relationships that can accelerate our efforts to bring more partners to the platform.

Secondly, we also continue to scale our direct selling force globally that deals with mainstream application companies such as Yelp, eBay, Amazon, Netflix, Pandora and others that are looking for broader distribution of their capabilities.

And finally, I've been pleased with the ramp of our inside sales group that's now 5% of insertion orders, but really helps us sufficiently scale the long tail of applications. And as many of you know, there are millions of applications in the Google Play Store and using an agency or a direct sales approach may not be the best way to facilitate getting those long-tail applications to the right subscribers. We will look to augment this group with a self-service platform for improved automation and efficiency.

And finally before I turn it over to Barrett, I want to conclude my remarks that the past September quarter was solid and the future growth levers of devices, products and media are all coming together nicely to drive continued profitable growth.

With that, this concludes my prepared remarks, and I'll turn it over to Barrett to take you through the numbers.

Thanks, Bill, and good afternoon, everyone. As Bill mentioned, we're very pleased with the results in the quarter, delivering 50% growth, sustainable and expanding profitability with adjusted EBITDA of $1.6 million and non-GAAP net income of $1.1 million, enabling positive free cash flow generation of $1.6 million in the quarter.

Now let me turn to the financial performance in the quarter. As a reminder, the results of our divested businesses are treated as discontinued operations for all periods presented in our financials. My comments today will refer to results on continuing operations, unless otherwise noted. All of our comparisons are on a year-on-year basis, unless otherwise noted.

Revenue of $23.9 million in the quarter grew at 50%. This growth rate represents an acceleration over Q1. While we continue to deliver revenue growth for more devices on the platform, a larger portion of the revenue growth generated in the quarter came from expanding revenue per device. Revenue per device or RPD of $0.96 in Q2 was up 30% over prior year, fueled by both increasing the advertiser demand and the expansion of our new products. In the quarter, other product revenues or our non-dynamic install business made up over 17% of total revenue as compared to less than 3% in the same quarter last year, illustrating the progress of the new products added to our platform.

Turning to gross profit and margins. Revenue growth enabled non-GAAP gross profit dollars to increase by $2 million year-on-year to $8.1 million in the quarter. Non-GAAP gross margin was 34% in Q2, expanding sequentially from 31% in Q1 of this year and down from 38% in Q2 of last year. The sequential rebound in margin is largely driven by improved revenue mix towards higher-margin partners in the quarter. As a reminder, our gross margin rates can be sensitive to changes in partner mix and revenue type, which can be pronounced during the holiday season, and these fluctuations may vary from quarter-to-quarter. We continue to be encouraged by -- about our opportunity to expand margins overall, and given our current revenue mix, we would expect similar margins as generated in Q2 over the near term.

We also continue to be pleased with the impressive expense scale in the platform. Total operating expenses were $7.2 million compared to $7.1 million in the prior year quarter. Cash expenses in the quarter were $6.4 million compared to $6.1 million in the prior year quarter or an increase of 5% amidst revenue growth of 50%. These results continue to highlight the inherent operating leverage in the business. I would note while we are not providing quarterly expense guidance, we would expect to make focused investments to support the new partners announced and launching on the platform in addition to the seasonally higher variable costs we see during the holiday season.

During Q2, adjusted EBITDA was $1.6 million, up from a loss of $0.1 million in Q2 of last year and represented an EBITDA margin of approximately 7%. Non-GAAP adjusted net income in the quarter was positive $1.1 million from continuing operations or $0.01 per share as compared to a net loss of $1 million or a loss of $0.01 per share in the second quarter of 2018.

Our GAAP net income from continuing operations for the second quarter was positive $2.1 million or $0.03 per share based on 77.2 million weighted shares outstanding compared to a second quarter of 2018 net loss of $6.6 million or negative $0.10 loss per share. Included in our GAAP net income for the quarter is a recorded gain of $1.6 million from the impact of the change in fair value of derivative liabilities resulting from our convertible notes, which is highly sensitive to the company's stock price. As a reminder, the derivative liabilities on our balance sheet will fluctuate as our stock price moves and may have a material impact on our reported GAAP financials.

Moving to the balance sheet. We finished the quarter with $8.3 million in cash and generated $1.6 million in positive free cash flow from continuing operations in the quarter. We had a small reduction in our debt levels as there were $800,000 in conversions on our convertible notes during the quarter and the gross principal amount of our original $16 million convertible notes ended at $4.9 million at the end of the quarter.

Before I turn to our business outlook, I wanted to provide a brief update related to the SEC matter tied to internal controls. As a reminder, we recently reported that the company was fully SOX compliant for the year ended March 2018. We have been working with the SEC on the final resolution of a settlement connected with the previously disclosed internal control matter. The company has recently received and signed the final settlement order, and we are awaiting the SEC to process and finalize the paperwork. The SEC's team has communicated they expect to have this matter finalized by the end of the calendar year.

Now let me turn to our outlook. We currently expect revenue for Q3 to grow to between $28 million and $30 million and expect adjusted EBITDA to grow to $1.8 million to $2.2 million in the quarter. With that, let me hand it back to the operator to open the call for questions. Operator?

(Operator Instructions) Our first question comes from Mike Malouf with Craig-Hallum.

A lot of exciting news, nice to hear. If I could just talk about a couple of things. First off, on Single-Tap. Sounds like you're launched with 1 partner and you're very close on the other to launch. Can you take us through a little bit of -- now that you're starting to launch, a little bit of how the model works? And who were some of the publishers that are actually using the product?

Yes, sure, Mike. So we're live with one at scale. We're in the process this month of getting at scale with the other one. We're already live on some devices with them. It's just going through the scaling process, which is really important for the demand side. They want to see those volumes from those 2 operators before they really go much larger at it. So now that we've been able to get over this kind of chicken or egg problem, we're excited about the prospects from it. In terms of specific publishers that are using the platforms, I think of names like Twitter, Yelp, The Weather Channel, all being examples of companies that are using the platform today. The pipeline, in terms of people that are interested in it, is quite impressive but they want to see scale. So that's what our focus is on right now.

And in terms of the model, what we're seeing right now, is, we've got really 2 models with this version of Single-Tap, not the integration we have with a large social media provider, but this model, Single-Tap, where we're getting paid a per transaction fee, whether that's from advertisers for seeing a video ad, for example, and then getting this Single-Tap application would be one model and the other one would be WAP to app, where you're in a mobile website like ESPN or Yelp or The Weather Channel and you're able to click and get the app directly to your phone and still stay in that experience. And that model is a per transaction fee as well, but that price per download we get on that latter model right now is trending a little bit higher is what we're seeing, but it's early days as we have to get to scale on it, but how we're thinking about it, Mike, is a per transaction fee that we get from every app that's downloaded.

Great. And then you just share that with the carrier, correct?

That's right. Or if it's open market and it's our own device, then we would keep 100% of the revenue, but yes, that's right.

Got it. And then with this new agreement with Samsung. It sounds to me like they're going to roll this out in very specific areas first. Is that how you see it? And then eventually get to larger areas or how do you see this working?

Yes, so we're in the planning phases of that for next year real-time as we speak. The good news is that it's not academic. We're launching this quarter, as I referenced in my remarks here in the United States with it. And our platform has now been basically integrated into the Samsung engine, if you will. And then what we'll do is, we'll go through a planning exercise, both with Samsung and their geographies and open market as well as a planning exercise and working with global operators that currently are not Digital Turbine partners. And then we'll work with them to decide which products off the platform they want to choose. So it'll be kind of a Chinese menu, so they could select Wizard, they could select Single-Tap, they could select Wizard, Single-Tap and dynamic installs, folders. It will vary based upon what that specific operator or what that specific Samsung open-market geography is interested in, and we're working through that real-time right now.

Okay, great, and then 1 final question. With regards to the self-service platform. That's, obviously I think, really needed in this new environment. Can you talk a little bit about the -- where you are in that process and where do you think that will -- when will that be up and running?

So we already have some, what I would call, kind of beta versions up doing some things now with that. We've brought on this new inside sales team that's done a great job, really working on the long -- what I call a long tail of applications. There's a lot of things to go to get that to commercial scale in terms of validating applications and approvals and testing and all those kind of things. It's definitely something that's a roadmap item for us at scale in 2019, but yes, we're just getting started on it today. And as I referenced in my remarks, we're starting to see some nice traction from that inside sales group.

Our next question comes from Darren Aftahi with Roth Capital Partners.

And offer my congratulations as well. Could you -- I guess first with the Netflix deal. Bill, could you kind of just give a little background how that came about, time to get something like that over the hump? And then just given how prevalent the need to drive subscribers across a myriad of businesses, I mean what's the pipeline look like for similar type media streaming deals? Second question would be the mix on new products going from 15% to 17% or better as composition. What drove the marginal improvement within new products? And then can you indulge me, if my math is right, and I appreciate there's some seasonal expenses here, but you're guiding to $400,000 roughly better of EBITDA sequentially, but revenues roughly $5 million better. So I'm just trying to make heads and tails of where the expenses or the incremental expenses that are kind of coming from there, or is that just conservatism is all?

Yes, you got it. So Darren, I'll take the Netflix and the new products questions, and then I'll turn it over to Barrett to talk a little bit about the guidance on revenue and EBITDA. Yes, regarding the Netflix deal, Netflix, historically, hasn't done a lot in terms of user acquisition and they don't have the same way that other traditional application companies work with what's called attribution, meaning how you measure the app, track the app, who has opened it, who's used it and there's a lot of providers who do that. So we worked with Netflix on a custom solution and integrated that in with a large North American operator and that's been live for a month or so now, so we've been excited about that. And then as we continue to work with Netflix, we decided to really expand that into the white space. So in many cases, Netflix may have other direct deals around the world with other providers and there's many that they don't. And so as they looked at our roster of partners and pipeline, I think that's something they became excited about to expand their distribution reach not just here in the United States with that large North American partner but more globally. And I think, as most people know, including yourself, that's a big important metric of subscriber growth for them. So great that we can help partner with them to meet their goals and objectives.

And as far as the business model goes, one of the things we're starting to do is historically, we've done more cost per install or cost per placement, where we get paid a fixed fee for the customer for either putting the app on the phone or the customer opening and engaging with the app. And now we're starting to do more of these revenue applications where we get a piece of the action as the customer spends on that application on a go-forward basis. Netflix is another example of that, but we've done that with other providers that I referenced like Amazon, Yahoo!, The Weather Channel and so on. So this is another example of that. And it's becoming much more noticeable. So it's not something overnight like CPI or CPP where you see an immediate growth, but as you get this embedded base of applications delivered, that recurring revenue is -- can become much more material, and we're starting to see that, so we're excited about that on the Netflix side.

And then regarding the new product growth, the new product growth is really what I was pleased. It's really balanced. It's not like there's one thing that's knocking it out of the park, that explains 100% of the increase. We're seeing it across the board. We're seeing it with our folders product that we put across all new AT&T and Cricket and a variety of other international operators and OEMs. We're seeing it with our Post-Install Notifications product as well. We're seeing it as growth with things like Single-Tap and the integration we've got with the large North American operator and the large social media company. So we're seeing it really grow across the board, which is encouraging. It's a major focal point for us in the business right now. So I've been excited about that new product growth and would encourage investors to continue to pay attention around our progress there. Let me turn it over to Barrett around the guidance.

Yes, Darren, to your question around investments, I've made some comments in the script. If you look back over, there is some seasonally high expenses, just variable expenses that come with the higher revenue that we've experienced in past holiday quarters. That's one, but in addition to that, we have investments across our sales force, across our product groups and our technology groups to make sure we're taking advantage of these new partnerships that we're rolling out. Some of those are already planned and some of those we're working with these partners to make sure these regions and these new launches are successful. Those are the types of expenses we'd anticipate seeing in Q3.

Our next question comes from Sameet Sinha with B. Riley.

Wanted to ask a couple of questions. Let me start with Samsung. And can you talk to us about, I know it's kind of early stages you're talking about 2019. How would the deal go? Is it like all devices or is it only on mid-tier, low-tier devices? Can you give us some insight there? Secondly, talking about the self-service product. I'm just trying to understand. I mean if we all know that ad inventory is highly valuable. What is the decision that you have to make, whether to go after the big brands versus some of the long-tail applications? Do they pay more? If they pay a higher price, how much higher is that? Some insight there. Then I have 1 follow-up.

Sure, Sameet. So first, regarding the Samsung agreement. From a technical perspective, it will work across the entire Samsung lineup. So there's not -- or Android lineup, so there's nothing that's unique about low end or a high end from a technical perspective. My guess would be is that would be contingent upon whatever the global operator wants to do. If they to want to put it across their whole lineup, only the high end, only the low end, across mid-tier, wherever that happens to be. So that will be something that we'll work with the global operators. Our history would suggest it goes across all of those based upon how we've deployed it in the past, but we'll see how that works. And then what we'll do in the open market is, we'll work with Samsung and their local management teams in India or Brazil or whatever the geography happens to be to decide which devices they want to target and which products they want to target. And we're just getting into the planning stages of that right now. And then we'll have a revenue share between us in terms of how all of that will work. So we're really excited about the partnership and where that's going.

As far as the self-service platform and how we decide what goes where, now that we're adding all these product and you think about things like folders where you've got to have dozens of applications and the right applications to recommend to a customer, being able to have those right applications delivered, they may not have the big budgets that some of the big names that I mentioned in my script will have. But nevertheless, those are the right apps to go to the right customer, so we will use a variety of techniques, AI and targeting to get the right app to the right customer. Obviously, we'll use an option process combined with that AI to get the right app to the right customer to ensure that we're meeting what the customer expects from us, but the self-service platform, this inside sales group will be key to driving growth of those new products as well as growth in a lot of these geographies outside the United States and making sure that we've got inventory fill for those partners.

I have 2 follow-up questions. One is, as you test out these new revenue streams like you explained with Netflix kind of a continued revenue share, what's the breakeven period between a CPI -- what would have got paid on a CPI basis versus this revenue share? And second thing was, as you sign much more of these long-term deals, whether it's a Verizon or AT&T, help us understand those thresholds that you have to meet. Is it on a cumulative, on a deal term basis? Or are they annual resets? How would that work? Because obviously you're showing great progress on a gross margin basis. I'm just trying to see if we -- if that resets every year or not.

Sure. So first -- in terms of the decision process, we have a model that we use to optimize the yield that we'll get from a specific application. And we'll know just because we've done this at scale now for a while, what the probability of consumer engagement is, consumer converting into a paying subscriber, consumer open rates are, et cetera. And then we can basically work the math backwards to say at the simplest level, if somebody's willing to pay us $0.50 CPP or somebody is willing to pay us a $1 CPI with 50% of the customers open or we know on a recurring rev share model, that 10% of the customers are going to pay us $0.05 a month for 10 months, we theoretically would be indifferent between those models because it all yields the same per device. So then it would really go to the AI and to the targeting to make sure we're getting the right app to the consumer. So we'll do that math and calculus to really optimize the yield, so we're maximizing the revenue per slot on that device. The revenue share is something that's becoming much more material, but we take a hit in the very short term than we would get for a CPI. But as we're starting to see in our numbers now, it pays dividends in the long run as that revenue stream continues to grow.

And then for your second question in terms of how that relates to our operating agreements. Obviously, I'm not going to get into specifics of any operator agreements, but just say generally from what we've filed is with our Verizon agreement, it's aggregate or cumulative. So you add up all the revenues together and then you hit a tier and then you're able to accrete margins. With our AT&T agreement, these are done as addendum. So individual products may have different margin profiles depending upon what those products are and what strategic goals AT&T and we are trying to achieve. So they are a little bit different in that regard.

Our next question comes from Jon Hickman with Ladenburg Thalmann.

Bill, I would just like to follow up on the Samsung, just a little bit. So is Samsung going to put -- Ignite on all their Android devices and then the operator gets to decide to turn it on or not? Is that what you're -- or is it a negotiation like the operator will say, I want this and Samsung installs it?

Yes, so John what we have is, is we have our suite of products in our platform from dynamic installs to Wizard to Single-Tap and so on. And so now what we've done is, we've integrated that platform into -- Samsung has an on-device installer. So we've integrated that platform into Samsung's core engine, if you will, versus us just placing it on separately, which is historically what we've done with other operators and OEMs. So now it's integrated into their broader platform. And so then it'll be a decision for Samsung of what they want to do in each individual geography, in each device for open market, and then it will be something that Samsung and us jointly pursue with different global operators and then those global operators would decide which products they want to deploy on which devices and then there's already pre-existing commercial agreements around what that revenue split would look like between us and Samsung and to the extent the operator is involved for non-open-market devices. So we're just getting that kicked off right now and working through the process as we get into 2019.

Okay. So you and Samsung have to go out and convince the operator to do this?

Well, I think that the barrier historically has been more that -- the operators have been -- had friction with Samsung on getting any third party platform installed globally. Now that Samsung has a solution, if you're a global operator you have the opportunity for the Digital Turbine solution on non-Samsung devices, now this integrated one on Samsung. So if you're a global operator who has had some friction with this in the past, now Samsung is able to offer a solution, so we think that's great news for our global mobile operator pipeline going forward.

Our next question comes from Ilya Grozovsky with National Securities.

I just had 2 questions. One, can you give the geographic revenue mix? And then the follow-up question that I had was, on the Samsung opportunity, what do think the impact will be on your gross margins? Will it be better than the carrier direct or will it be the same or worse?

Yes, so let me take the first one on the Samsung, and I'll turn it over to Barrett on the second one, Ilya. As far as the Samsung deal goes, we expect the margins to be better than what we currently have with our large North American partners on a go forward basis, and I'll turn it over to Barrett for the second one.

Yes, you'll find listed in the Q, we've got the revenue breakout by region. It's a little north of 70% for the U.S. and that's a breakout by advertiser location. So just north of 70% is coming from the U.S.

This now concludes the question-and-answer session. I would like to turn the conference back over to Bill Stone for any closing remarks.

Thanks, everyone, for joining the call today. We look forward to reporting on our progress against all the points made on today's call, and we'll talk to you again on our fiscal third quarter call in early 2019. Thanks, and have a great night.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.