What happened

Shares of Digital Turbine (APPS -7.46%) were absolutely hammered by the market on Thursday after the adtech company reported financial results for its fiscal 2023 fourth quarter Wednesday after the close. As of 12:45 p.m. ET, Digital Turbine stock was down by about 43% and had hit its lowest point in nearly three years.

So what

In the quarter, which ended March 31, net revenues for Digital Turbine were down almost 24% year over year. And for fiscal 2023, net revenues fell 11%. Toward the beginning of the pandemic, the company went on an acquisition spree that promised energized, synergistic growth. That promise is going unfulfilled, and the market is understandably quite disappointed.

In the earnings conference call, CFO Barrett Garrison said, "We are well positioned to resume the strong growth when the macro landscape improves." But I believe that assertion is contributing to the stock's decline Thursday. By repeatedly pointing to the macroeconomic environment as the reason for its disappointing financial performance, it seems that Digital Turbine is suggesting that it is a cyclical business and not in a strong growth market.

This seems to be negatively impacting how this company is perceived and valued by the market.

Now what

For the first quarter of fiscal 2024, management is forecasting that Digital Turbine will generate net revenue of $140 million to $145 million. That would amount to a year-over-year drop of 23% to 26%, similar in magnitude to its fiscal Q4 decline. 

Some investors may take consolation from the fact that Digital Turbine is still generating positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) and that it has positive free cash flow. However, the company's acquisitions greatly increased its long-term debt and boosted its stock-based compensation expenses. Adjusted EBITDA and free cash flow don't factor in these real expenses.

In other words, Digital Turbine is struggling to create shareholder value because its acquisitions are eating into its profits. That might have been OK if the business was growing as a result of those acquisitions, but it's not. And until it begins growing again, I doubt the market will regain an optimistic view of Digital Turbine's prospects.