APPS Stock Price Increased 14.08%: Why It Happened

By Amit Chowdhry ● February 27, 2021
  • The stock price of Digital Turbine Inc (NASDAQ: APPS) increased by 14.08% on Friday, February 26. This is why it happened.

The stock price of Digital Turbine Inc (NASDAQ: APPS) increased by 14.08% on Friday, February 26 as it went from a previous close of $72.38 to $82.57. Investors appear to be responding to Digital Turbine buying AdColony for $400 million from Otello Corporation ASA, a Norway company and sole shareholder of AdColony.

AdColony is known as a leading mobile advertising platform servicing advertisers and publishers with a reach of more than 1.5 billion monthly global users.  And the company’s proprietary video technologies and rich media formats are viewed as best-in-class technology delivering industry-leading third-party verified viewability rates for well-known global brands like Disney, Amazon and BMW.

The deal for AdColony is fully consistent with Digital Turbine’s expressed strategy to provide a comprehensive media and advertising solution for our operator and OEM partners while enriching the mobile experience for end users by delivering highly relevant content to their fingertips.  And the acquisition is subject to the approval of the Otello shareholders and is expected to close in the company’s fiscal fourth quarter.

The total estimated consideration for the AdColony acquisition is in the range of $350 million to $375 million, paid as follows: (1) $100 million in cash to be paid at closing, subject to purchase price adjustments, (2) $100 million in cash to be paid six months after closing, and (3) an estimated expected earn-out payment in the range of $150 million to $175 million, to be paid in cash based on AdColony achieving certain future target net revenues, less associated cost of goods sold, over the 12-month period ending on December 31, 2021. Digital Turbine intends to pay the purchase price with a combination of available cash on hand and borrowings under its existing senior credit facility along with future capital financing.

KEY QUOTES:

“We are extremely excited to announce the acquisition of AdColony today. We look forward to welcoming the AdColony team to the Digital Turbine family and believe that this strategic transaction will accelerate our growth and is a positive for our partners, advertisers, employees and shareholders. AdColony saw the secular tailwinds toward mobile, video and high-speed networks like 5G before most and has been able to capitalize on its vision.  The ability for Digital Turbine to utilize AdColony’s unique mobile advertising solutions across our vast device distribution footprint will unlock significant new monetization opportunities for the combined company’s platform offerings.  With the addition of AdColony, we will expand our collective experience, reach and suite of capabilities to benefit mobile advertisers and publishers around the globe.  Performance-based spending trends by large, established brand advertisers present material upside opportunities for platforms with unique technology deployable across exclusive access to inventory.”   

“We look forward to providing more specific details regarding our forward financial projections for AdColony after the transaction has closed.  Considering the current run-rate of recurring business at AdColony, along with expected realized synergies and the terms of consideration, we anticipate that the AdColony transaction will be substantially accretive to our expected profitability in the first full year following the transaction.”

— Bill Stone, CEO of Digital Turbine

“AdColony is excited to join the successful team at Digital Turbine. The underlying strategic rationale for the combination is very promising.  We believe that Digital Turbine, with its extensive global relationships and distribution, will be uniquely positioned to benefit via the seamless integration of AdColony’s mobile video advertising expertise and global brand advertiser awareness.  The combination will yield a highly-differentiated and more vertically-integrated solution for the mobile advertising industry.  We look forward to joining Digital Turbine to help navigate this innovation.”

— Lars Boilesen, CEO of Otello

“Digital Turbine offers many complementary and additive solutions to AdColony’s performance business, while we bring an industry-leading SDK footprint and a mature and thriving brand and agency team to the partnership. When you combine the reach and capabilities of both companies, you have a powerful platform that will drive growth and outcomes for any buyer that participates in the mobile app economy.”

— Jude O’Connor, AdColony’s chief revenue officer

Disclaimer: This content is intended for informational purposes. Before making any investment, you should do your own analysis.