Investment Thesis
Digital Turbine achieved exceptional 1065% revenue growth but remains unprofitable with an interest coverage ratio of 0.6x, indicating inability to service its $361M debt load from operating income. The combination of negative net income, negative returns on equity and assets, high leverage, and weak cash position relative to debt obligations creates material refinancing and solvency risk.
Strengths
- Exceptional 1065% revenue growth demonstrates strong market demand and successful growth strategy
- Solid 56.9% gross margin indicates healthy unit economics before operating expenses
- Positive $41.8M operating cash flow provides near-term liquidity support
Risks
- Critical: Interest coverage ratio of 0.6x means company cannot cover debt service from operating income, creating refinancing risk
- Net loss of $37.7M despite massive revenue growth suggests acquisitions lack profitability integration
- High debt-to-equity of 1.88x combined with low cash position ($37.7M) amplifies refinancing risk
- Negative ROE (-19.6%) and ROA (-4.5%) indicate shareholder value destruction despite top-line growth
- Free cash flow margin of 2.0% leaves minimal operational buffer; heavily dependent on sustained growth
Key Metrics to Watch
- Interest coverage ratio - must exceed 1.0x to ensure debt serviceability
- Path to net profitability - timeline and sustainability of positive net income
- Debt reduction trajectory - ability to delever toward healthier 1.0x debt-to-equity
- Operating margin expansion - whether company can achieve operating leverage at higher revenue levels
- Cash conversion - quality of earnings and free cash flow generation sustainability
Financial Metrics
Revenue
565.3M
Net Income
-37.7M
EPS (Diluted)
$-0.33
Free Cash Flow
11.2M
Total Assets
841.7M
Cash
37.7M
Profitability Ratios
Gross Margin
56.9%
Operating Margin
6.0%
Net Margin
-6.7%
ROE
-19.6%
ROA
-4.5%
FCF Margin
2.0%
Balance Sheet & Liquidity
Current Ratio
1.16x
Quick Ratio
1.16x
Debt/Equity
1.88x
Debt/Assets
77.2%
Interest Coverage
0.58x
Long-term Debt
361.0M
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-28T07:40:29.456655 |
Data as of: 2026-03-31 |
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