Q4 2021 Zedge Inc Earnings Call
Ladies and gentlemen, thank you for your continued patience. Please do not disconnect. Your lines. The conference call will begin in approximately two minutes. Once again, we thank you for your patience does edge conference call will begin in approximately two minutes. Thank you for continuing to hold.
[music].
Good afternoon, and welcome to <unk> fourth quarter and the end of fiscal year 2021 earnings conference call. During management's prepared remarks, all participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
After todays presentation by is that just management, there will be an opportunity to ask questions to ask a question. Please press Star then one on your Touchtone phone to withdraw your question. Please press Star then two.
In today's presentation, Jonathan Reich, such as Chief Executive Officer, and he saw is that just chief financial officer will discuss such as financial and operational results for the fourth quarter and full fiscal year that ended on July 31, 2021 any forward looking statements made during this conference call either in the prepared.
Remarks, or in the question and answer session, whether general or specific in nature are subject to risks and uncertainties that may cause actual results to differ materially from those which the company anticipates. These risks and uncertainties include but are not limited to specific risks and uncertainties disclosed in the reports that surge files periodically.
With the U S Securities and Exchange Commission.
That just assumes no obligation either to update any forward looking statements that they have made or may make or to update the factors that may cause actual results to differ materially from those that they forecast.
Please note that <unk> earnings release is available on the Investor Relations page of the <unk> website. The earnings release has also been filed on a form 8-K with the S E C.
I would now like to turn the conference over to Mr. Jonathan Reich.
Thank you operator, and thank you all for joining US today. Good afternoon, welcome to <unk> fourth quarter and fiscal year end 2021 earnings conference call I'm, Jonathan Reich, Ceos edge and with me is our Chief Financial Officer, <unk>, <unk>, who will provide additional.
Insight into our financial performance, we will then be happy to take your questions on today's call I will address the company's amended 10-Q filing for the third quarter ended April 32021, and briefly review our fiscal 2021 results.
I'll then conclude by discussing the next stage in our evolution.
During our year end audit, we came to the conclusion that we have a material weakness in disclosure controls and procedures related to the reporting of the valuation allowance against deferred tax assets, resulting from incorrectly attributing.
As of Q4 benefit when it should have been recognized as a Q3 event.
The change has no impact on our full year results and we are working diligently with our auditors and tax advisor to.
To properly remediate the weakness and ensure that we do not face similar challenges going forward now moving on to our business for.
For those of you that are new to the Z story, we own a portfolio of leading digital consumer brands that served 43 million monthly active users around the globe.
Our portfolio consists of <unk> wallpapers for leading mobile app used for mobile phone personalization, social content and Vandemark, that's premium a marketplace for artists celebrities and emerging creators to market their digital content to users.
<unk>, the leading source of all things emoji and shortz, a mobile entertainment.
Currently in beta focused on short form storytelling.
We possess deep expertise in monetizing our digital real estate, whether through advertising subscriptions or content sales our products appeal to a wide range of customer segments globally, and we have a strong user base in North America, and Europe, as well as in emerging markets and India in particular.
Yes.
We finished fiscal 2021 which ended on July 31.
<unk> 2021 on a high note reporting full year revenue growth of 107% eight.
$8 $2 million and net income and over $9 million in EBITDA and GAAP EPS of <unk> 69 versus a loss of <unk> last year.
Our business has tremendous operating leverage which led to a 40% operating margin for the fiscal year and we generated over $10 million in cash flow from operations, we closed the year with $25 million of cash on our balance sheet and almost no debt advertising revenue was the bigger.
This driver of this growth as we continuously optimize our technology to drive higher prices received.
For every 1000 advertising impressions also known as Cps.
Subscription revenue and active subscriptions increased to 101% and 49% respectively for the year.
Although we experienced a material slowdown in active subscription growth during the second half of the year, we have a set of growth initiatives underway that we believe will reverse this trend on a positive note even those edge isn't a must have app, we nonetheless maintained healthy renewal rates of approximately 45%.
And 60% for second and third year renewals respectively.
Turning to some key performance indicators for a moment monthly active users or MAU increased 8% in the fourth quarter with emerging markets up 16% driven mainly by demand in India developed markets remained a challenge with now declining in the low double digits over the year.
<unk> arc now or average revenue per monthly active user increased 76% versus last year, demonstrating our strength in monetizing users.
Markets are a key area of focus for US is the impact of advertising and subscriptions and I will detail what is being done to deliver growth in these markets shortly.
As we look to the future. Many investors have asked important questions about the size of our opportunity target growth rates over a sustained period and what a mature operating model will look like in three to five years, while we are not yet in a position to provide this information we are expanding our <unk>.
<unk> from a solid foundation of 43 million monthly active users from which we will continue to extract value.
We are looking at ways to further fuel growth in our existing products as well as introduce new products that can yield outsized returns. We will do this in a disciplined fashion by managing our risks while also looking for opportunities that have optionality in fiscal 2021.
We made great strides in progressing our product organization, which I believe positions us well for continued success over.
Over the course of the year, we invested in product management and now have dedicated product managers for our premium as Ed to App, <unk> premium or <unk> plus subscription offering.
The newer initiatives, including Schwartz.
With the leadership in place we have started shifting to a full stack product team structure to improve efficiency and quality.
Foundation said I will now talk to our strategic priorities for 2022 and beyond.
Top priority is growing our customer base and improving engagement, particularly in well developed markets.
<unk> already started rolling out personalized recommendations harnessing the machine learning algorithms that we successfully tested over the summer.
Before the end of the calendar year, we plan to introduce social and community features.
Which we will iterate on over time many of these initiatives are coming to fruition due to the foundational work, we completed in fiscal 'twenty, 'twenty, one, including overhauling, our content management system and unifying user accounts.
We have also started testing and analyzing paid user acquisition campaigns.
And we will expand this effort as long as it proves to be accretive.
Next we will continue investing in the parts of our business that offer Optionality presents premiums. This means introducing one of a kind and limited edition content and a user and eco friendly fashion developed through technology innovation.
One planned part of this new content offering will include introducing NFC use as a way for our artists and creators to offer protected unique content.
We will also test new content genres, and audio implementations and Schwartz, while expanding the user base with paid user acquisition and simultaneously deepening our understanding of the target demographic beyond personalization and short form entertainment, we are evaluating several potential new product off.
<unk>, but it is too early to provide further details at this time.
We are also committed to enhancing our subscription offering by creating value added bundles like exclusive content and enhanced features as well as possibly introducing a multi product subscription offering.
Unlocking <unk> value is another priority, we are committed to growing our <unk> business beyond desktop and mobile web by opening it up to the world of native mobile apps, coupled with this as our interest in localizing our mode to PDL and supporting other languages beyond English our team is also apply.
<unk> on improving monetization by enhancing the AD stack and possibly offering a subscription product and finally, there is M&A, where we are searching for symbiotic opportunities that can benefit from access to our large user base our expertise in monetization our technical know how.
And our skill and managing a complex platform amongst other benefits of course I cannot assure you that any of these will come to fruition, but suffice it to say we are actively looking have engaged in some discussions and have passed on others.
In closing, we had an outstanding record year in fiscal 2021 but are not resting on our laurels and are working diligently to drive longer term growth.
That said given it is early in the year and we have some pretty tough comps to beat from fiscal 2021, we are starting the year guiding to topline growth of 25% to 30% at these levels. We expect continued net income growth strong operating margins and cash flow and strong EBIT.
<unk> growth before handing the call over to <unk> I want to thank you our investors for your support I also want to remind everyone that our success is a direct outcome of the outstanding team of talented and dedicated professionals, who work as edge and who go above and beyond to execute our vision.
Thank you now I'm going to turn the call over to <unk>, who will provide details about our financial performance.
Thank you Jonathan I wanted to start by reminding those who won't call that our fiscal year ended July 30, Schwartz occasionally the time active subscription it's a natural you spoke local play.
Now includes of Shannon Hall, which is a subscription status that begins when the users from a payment for you.
Three days Grace period, and it will allow payment resolution.
Cancel period lasts up to do these days with the aim to encourage renewals and reduce the cancellation rate.
Once in a can well pad the 30 day period. It is no longer an active subscription.
Moving to our full quarter results monthly active user on now defined as the number of unique user.
Open not aptitude lots 30 days of the period.
Increased 8% to $34 4 million in June July versus 31 9 million in July 20 Covid.
Emerging markets now expanded by 16%.
Total revenue in the fourth quarter increased 93% from last year.
<unk> $5.2 million this year with benefited from our ongoing work to improve our AD operations.
Subscription revenue was up 55% from last year.
Still demonstrating strong growth despite a slowdown in net additions during the second half of the year.
Zach premiums gross transaction value at <unk>.
D.
That is the total sales volume transacted through our marketplace.
That's about $274000 up 45% compared to the year ago quarter and 9% sequentially.
As Jonathan indicated this is a key focus for us going forward.
It will be the potential in the marketplace is still substantially.
Active situations with 49% versus last year.
Beginning July one 2021, Google updated its policy and reduced fees for the first $1 million in App purchase.
15%.
Which include subscription and pulp in sales and in land increased to a 30% fee.
Yes.
After 12 months this fee dropped back down to 15% for annual and monthly subscription.
Yes.
<unk> is accounted for as a marketing expense within SG&A.
In Q4, we continued to see annual second renewal rate.
Profitability, 45% and 30 year review are coming in at 60%.
Which is generally considered to be a strong performance within the industry fully non central app.
The slowdown in net sufficient growth in the second half of the year basically due to the number of new subscription habit.
Offset by lower churn rate.
Which has remained a constant percentage EBIT grew to a higher baseline.
Such group.
This is a common problem for consumers subscription.
Subscriber base gets larger.
And as Jonathan mentioned, taking steps to return this number to a net positive.
Overall, the average revenue per monthly user.
It was 5%.
An increase of 76% year over year.
Driven by the combination of better.
Performers and higher pay subscription number versus last year.
Operating margin increased to 42% versus 14% last year.
<unk>, the continuing revenue growth and strong operating damage from the carriers in August.
Net income and diluted EPS were $2 $5 million in 17.
Respectively.
Net income of $500000 and EPS of four cents in the prior year.
Average shares outstanding for the full quarter, what about 15 million or diluted basis.
The increase of presenting a share issue.
Dear it's Paul about now completed ATM.
Combined with option exercises.
EBITDA was $2 $7 million versus $830000 last year.
On a liquidity standpoint, we remain in a strong net cash position.
No debt and nearly $25 million in cash and cash equivalents.
$20 million increase from last year.
That sequentially, despite haven't put up a full point in dollars and cash into escrow.
<unk> acquisition during Q4.
Now I would like to provide some more color.
On the guidance Jonathan provided for fiscal 2022.
These days, we are initially planning guidance for revenue growth of 25% to 20%.
Due to all of the new initiatives and future releases.
<unk>, which usually pick in our second fiscal quarter may not be typical this year and internally we are modeling sequential revenue growth this quarter.
So we get into the year and have better visibility into the impact of our new initiatives.
We expect to provide updates.
Yes.
Despite the increased level of investment. We currently believe that we should continue to improve operating margin of at least 40% for the year.
For modeling purposes, we expect to be a taxpayer this year and then expected rate of 21%.
How should we use all of our annually in fiscal 2021.
I would also suggest using 15 to $15 4 million share for calculating diluted EPS.
Given the increases in the logical item.
Significantly the tax rate.
<unk> needs to be a drag on EPS growth in fiscal 2022.
As Jonathan stated.
We anticipate continuing net income growth with strong cash flow and EBITDA growth.
For EBITDA, we are pocketing a growth rate that is slightly higher than our revenue guidance.
Thank you for listening to our full quarter earnings call.
Hope that each of you remain safe.
I look forward to speaking with you again on our next call.
Operator back to you for Q&A.
Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.
Using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Thank you.
Our first question today is coming from Alan Klee at Maxim Group. Your line is live you may begin.
Good afternoon, great results.
One area that stands out to me is Serge premium where it looks like your efforts have.
You showed good traction with gross transactional value can you talk a little about kind of.
What do you.
Attribute that to and how you think about what youre going to do going forward that should hopefully continue this.
Hi, Alan Thanks, so much for the compliment and great question.
So.
As you recall.
In <unk>.
'twenty 'twenty and early 2021, we had a major overhaul of our content management system. We also.
<unk> had mentioned that we were doing optimizations.
In terms of what the page layout looks like.
And that has been certainly a contributor in that group and that growth.
The net result of the overhaul deposit Madison fulfillment is one which allows for us to co mingle.
Premium content together with premium content, making it more available.
And prominent.
To users across the board.
And the work on the.
User interface is ongoing.
So those are certainly two ingredients that we've been using in the water to drive that growth in terms of.
Future efforts.
There is going to continue to be optimizations that we undertake.
And we also as we've mentioned in previous calls have a dedicated.
Alex manager that is now focusing on this area, we're going to be launching our <unk> T product in that premium as well.
<unk>.
Our COO.
Hope is that.
The combined efforts of improving the product, making it more visible having artists.
Promote their hardware as well as.
Also bringing in potentially new content formats will all contribute to.
Driving that part of the business and I'll close by saying that one of the goals that we have as well too.
Increase the.
Artist community that participates in that premium today.
More high quality artists.
Is is.
Something that we have on our radar screen.
And our ability to avail of that content to users.
Whether it be through through your search and discovery improvements that we have made and continue to invest in.
Will also be a part of driving growth in that part of the business.
Yes.
Thank you.
On the subscription side.
Couple of things good year over year growth, it's slowing down sequentially.
Talk a little about the actions you're looking to do two to.
To grow that and is there a way to think about.
With Google changing their policy to move to 15% take in the first year from 30% starting January one how.
Potentially how meaningful that that could help you guys.
Sure. So in terms of subscriptions, we've got several different.
Things that we're focusing on it.
What is overall improving the value of subscription.
By potentially offering whether it be content.
Our other value adds that we can add to the subscription bundle.
Also are seriously looking at rolling out subscription.
On iOS.
And we.
We are.
Looking at ways in which we can.
Take advantage of Ftes in the subscription model, although that is very very early stage I don't know if that will ultimately come to fruition, but nonetheless, something that we are looking at in terms of.
The benefit of both Google and Apple lowering the subscription.
<unk>.
Commission from 30% down to 15%.
That can benefit us.
To the tune of give or take around $150000.
In the event that we roll.
Ascription out on iOS, there's that potential there and then Google platform that can be an incremental $150000 that flows down to the bottom line.
That's great.
With.
Investing in marketing automation, and you know and a measure fashion driving users into the app based upon sending them a push notification and time at two specific needs or.
Uhm interests that they have and also items, which I guess more generally we'd be described as gamification of the app. So by way of example, if there's a new piece of content from a particular genre that you like.
Or particular solve that you like you would actually see a little let's a red dot on the App icon that sits on your phone and our expectation is that that will translate into drawing users back into the app more regularly.
So those are all actions that are very much focused on increasing engagement and specifically we are optimizing this for the tier one markets accordingly.
Separate and apart from that we have yeah separate and apart from that we have started to invest N paid user acquisition campaigns.
And those are solely focused on the tier one markets. Our goal there is two and a measured fashion.
Acquire users in these tier one markets in a fashion, where those users are all wrong positive and if we reach a threshold where.
You know, we're unable to bring a user on for a profit margin. Then we will you know trim back on that spend accordingly.
That's great so emerged P D Uh huh.
How did you know that you've have it under your belt for a little bit a couple months not a couple months [laughter] couple of weeks whatever [laughter] how.
What what's your impression now and then your thoughts.
You know of of how meaningful this this could be.
<unk> to your company overall.
Sure Uhm, so stole a little bit early to answer that question and we're looking at several different possibilities with respect to product development and further enhancing what this property offers today as I. Thank you.
No motive heat is likely the number one leader when it comes to anything and everything having to do with the Mochi is it is an AD supported business today in early 20th 22, I believe that we will begin to overhaul the.
Add portion of the business and potentially explore other ways in which we can actually monetize.
The site and at the same point in time look for opportunities to.
Expand the business across you know the world of native mobile apps.
Maybe that means embedding their contents within the existing edge.
Flagship app or actually at some point in time.
Spitting out a separate Standalone <unk>.
[noise] type App those are all options that we are looking into today I want to reiterate that the beauty of this acquisition is that <unk> on a standalone basis, just continuing to do what it currently does is accretive to us has outstanding.
Gross margins, which really align with our flagship business and.
Helps us in terms of increasing our monthly user monthly active user base two summers around 43 million monthly active users and as you can imagine a merger P. D. A is also got a very strong user base in developed markets.
We also believe that there is opportunity to grow that business and emerging markets potentially by localizing My motor P. D N offering it in different languages.
That will be it will result in making it relevant to folks that are not English speakers, accordingly, and that's a potential new growth trajectory as well.
<unk> is there a way to cross shelter.
<unk> and Z users to to try to get them to engage in the in the other products.
Absolutely I just want to let you know that we are looking at that what we want to be.
Pretty careful about is maintaining the experienced in the expectation that the core user base has <unk> and as a result, we are.
You know preceding deliberately and slowly and monitoring changes that we make so that we don't inadvertently.
Cause users to become frustrated and potentially look elsewhere for emoji related content, having said all of that no question of a doubt we have had several conversations you currently about how we can do that and when we should do that and also.
As I've said exploring other ways in which we can make the emergency media content Bible beyond the world of web in native mobile apps as well as potentially uhm incremental monetization opportunities.
That can help further grow that business accordingly.
Thank you could could you provide for shorts could you provide an update of your.
Your strategy for for this coming fiscal year.
Sure.
So.
Let's let's move back in time give or take around six months ago. We had brought in a new product manager to really take control of Schwartz.
He's spent and invested a fair amount of time and making sure that we have all the tools and plumbing in place that would help us in terms of optimising the experience as well as.
Uhm understanding what users were doing it <unk> <unk>.
User segments, uhm or engaging with.
The App Accordingly, we also started to roll out on a test basis short cats, which are audio versions of these stories and looking into physical your 20th 22, we expect to further.
Expand that audio offering and look at ways in which we can either create podcast narratives or bring on influencers that will translate into driving users into the app consuming the content and giving them ubiquity. So.
That they can either listen and <unk>.
And we also are investing time in understanding better what are additional content channels are content genres. It would resonate with various user second accordingly.
And finally investing and paid huge or acquisition with the goal seemed to it that you know we've got a positive return I had spent and I'm happy to say that you know with the.
Modest budget that we have been investing in Schwartz for the last couple of months, we have been able to achieve that result.
So all of those taken together.
Are going to drive our investments in this and this app and in this overall.
Uhm.
Content type for the you know for the foreseeable future in the event that we come to a point, where we see that return on and spend a negative or that we cannot continue to engage users and improved monetization and engagement and so on and so forth. Then you know we were.
<unk> update investors and sort of let them know what we Wanna do at that point in time, but for now it continues to be an area of innovation and development for US. We believe that there is an increasing demand for having great storytelling platforms.
And we wanted to be a part of.
That ecosystem. If you will so this will continue to you know get resource investment you know in the company.
That's great a question on your <unk>.
Average monthly revenue per month reactive user that that's been.
Very strong year over year up you know.
77% or so but.
Is there any way to think <unk> I mean is it reasonable to think that the current rate is probably a reasonable assumption going forward or is there any reason to think does that there's opportunity for that ready to go up even higher.
Yeah, I think that.
I'm not I'm not able to provide you with a clear answer but I can share with you that there are a couple of different forces.
That are playing in the business that could result in you know.
An improvement.
Essentially you know slow things down uhm on the improvements side, you know, we continue to invest time and resource in optimizing the app and in seem to it that we.
Are committed to driving new users in and new users from tier one markets. If we are successful in achieving that goal just by dint of the fact that you.
Users and well developed markets monetize.
At a higher C. P. M. Then users in emerging markets back with a result in uhm and a driving you know that number back to back P. P. I keep.
Keep performance indicator up.
At the same point in time.
You know, it's it's important to note that no pub, who has been our mediation platform that is the platform where all of our inventory AD inventory is available for sale wasn't recently acquired by App loving Apple oven may.
Disable the Mo pop mediation platform at some point in the future and.
You know in the event that that happens, we will need to invest resource and <unk>, we migrate to a new mediation platform.
And there's always a risk that's a major undertaking is always a risk that you know we'll hit some air pockets. There obviously each mediation platform has its own secret sauce that needs to be and so to speak.
<unk> or needs to be.
<unk> in order to yield the greatest return accordingly so.
Yeah. Those are just two potential areas that could help or potentially slow it down a little bit in terms of improving.
Improving that right.
That's great congratulations thank you.
Thank you.
Thank you. Our next question today is coming from Brian Warner a private Investor. Your line is nine you may begin.
Hi, guys. Congratulations on a good yeah I got a couple of book club vacation and then a question or two if I could.
On the classification did I hear correctly that for the year, we should be thinking about a tax rate for for reporting purposes, but that 21%.
Is that a fair assumption precurse taxes as well.
And then another question that I hear correctly that is December you're going to start to introduce.
Some of the social features on the App just wanted to confirm that.
Then you you've got about $25 million.
Oak about potentially going into a couple of new products or a different products and you also spoke about potential you know sort of an acquisition.
Tunnel is the right word but.
I'm just wondering if if you can give a little bit more color on sort of what would be on your acquisition wishfully, including how large a deal you're you're you're more likely to make.
I will give us a sense of what the range might look like if you could.
Hey, Brian Thanks, so much for the comment and what I'll do is I will take the social features in emanate question and then I'll hand over E who can provide you with feedback on the on the tax relief.
Latest question. So you are correct. What we have said is that we're going to begin to roll out a social and community features.
In give or take December of this year and there was will continue to roll out on an iterative basis on adult forward you know going forward. We also had mentioned that we're going to launch and if he is before the end of the calendar year and we will launch.
With one of a kind content to start with and then N calendar 2022, we will begin to improve upon that by offering limited edition and potentially auctions and drop dates and.
A trading platform. All those features are ones that we are looking at closely based upon what we see in the use and consumption of N. F. P is that will drive where reinvest and how we roll out and enhance.
Aunts that N F T offering turning to emanate for a second.
Yeah, I I I I.
I don't want to get into too much detail because we are trying to be smart about potentially how we put that money to work and your.
At the same point in time, we are looking at I would say generally speaking opportunities that can.
Health and growing either our existing business or would complement our existing business in a meaningful fashion. We've had some opportunities that you know we.
Have lengthy.
Diligent underway and for one reason or another ultimately had walked away and we're keeping our ears close to the ground in terms of <unk>.
Properties and apps and assets that.
Can either help us in terms of.
Growing our customer base and revenue base and or ones, which you know have a strategic value in terms of accelerating <unk> accordingly.
That's one quick follow up before I forget you had mentioned one one of the benefits of overhauling.
Yep, you're able to get out of it if I understood correctly more sort of premium products and so the the the general ecosystem. So it has more exposure and I guess I'm wondering whether that same benefit will include you with the N F T.
Okay I have a <unk> correct, Sir I I think yeah, like what you're saying definitely you know it it's definitely a lives with our thought process and [noise].
The underlying.
For the foundation for having overhauled the content management system was precisely to avail content to users in a fashion, which made it much more.
Available and prevalence to them and at that is manifested across so many different ways in which users interact with the app.
Whether that means that they're just scrolling through you know the homepage, whether that's through you know search weather that through discovery and are taking advantage of the benefits of let's say machine learning in order to serve up the right contacts are fundamental beliefs.
Is that when a user enters these edge app their first and most important goal is to see to it that they are being served the contents, which is relevant to them if that is content, which is free.
Free content or if that's content, which is premium content. If it's relevant we think that that will serve us a great advantage in terms of ultimately driving revenue from that cost.
And with that in mind that has helped in terms of.
<unk> <unk>.
G T V and our hope and expectation is that as we roll out N. S. Ts that that will also contribute to the purchase of the N F T as in our class form.
You said you wanted to go and all the questions Yeah.
Yes, I'd be happy to alright, So [noise] full physical 2021 would expect to use up all saddle N carry for which is file a 5.6 million so I'm going to a physical Tony Tony too. We you know for both of them.
Prepares we used 21% tax rate, which will be also like cats pay would be obvious be making a cold the payment dependent profitability awesome is and can simply state taxes would you still have an available in California, and New York.
Connecticut, So we don't expect to to be that that taxpayer I'm gonna stay level.
Oh man so crushed it.
Yeah that sounds exactly thank you so much.
I am too.
Oh.
And.
And we'll we'll be in touch.
Thank you Brian.
Thank you.
Our next question today is coming from William von at Regent Atlanta Atlantic Capital. Your line is like you may begin.
[noise], Hey, guys. Congratulations on the on the good quarter. My question relates to the edge premium and you mentioned that as a non essential that there's a lot of church.
Uhm do you expect that church continue on the same rate being out of central App or do you think over time as the security grows in the flywheel expand that that Cherry will eventually get lower than what are some ways and initiatives that you think you'll be able to achieve that.
<unk> William Uhm. Thanks, so much for the comments, let's just go back to what we said what we had said is correct. You know if you take Z and compare it to I ways or to a Netflix by way of example work sort of class.
<unk> you Gotta have those apps on your phone and if you drive everyone uses ways for some sort of napping app if.
If you're consuming in a movies chances are you know your your Netflix subscriber. So it's you know <unk> and contracts that we need not central but with respect to churn. What we said was and are paid subscription business, we're seeing what we.
Believed to be rather healthy renewal rates in you know first and second year renewals, even though we are quote unquote in on the central at.
And I would say that you know in terms of the broader question that you have.
Are in.
Investment in.
Things like social and community features are specifically geared towards improving engagement and driving users back into the app on a you know more regular basis.
And engaging with the content that they fine appealing and of interest to that so that is no question of a doubt a area of focus for us. It's one that we've been investing resource into for Awhile and you know I won't say the finishing line is nearby.
The starting line of being able to roll those teachers out is you know.
Going to take place N calendar here 2021, and we'll continue we will continue to invest in that on a iterative basis rolling out enhancements and other features within that.
Set of opportunities on an ongoing basis the ones that are working when we will double down on the ones that aren't working Y C. Hey, why isn't it working as it because we have not you know rolled it out in the best possible way or there's some other factor in there there you know we need to be sensitive to.
Yeah, but thank you for the clarification on there are no although Norway. That's good color follow up.
What do you think are the main drivers that are bringing artists and creators to the judge Pigman. There you know what are the main ways of adding value.
And what are ways that you're thinking of adding more value to get more creative and she'll go into that ecosystem.
Sure. So first of all that premium is not in at the premium is a marketplace that is embedded into our existing Z.
Ringtone and wallpaper app or is it wallpaper app on I O S and.
What we have been.
I would say religious about from day, one is seen to it that we had built a marketplace by artists that is you know geared to artists we want to make sure that.
Artist understand very and and it's very intuitive to them what they are capable of doing within that.
Artists are attracted to our platform because they know they have access to 35 give or take 35 million monthly active users vet can find their art and can then make a decision as to whether or not they want to purchase that art.
And in addition to that artists are making money off of that so you can imagine that you know there's a [noise].
Nature photographer that is doing this in order to enhance their income or a very fair platform and they have the potential of generating revenue from.
There you know art form accordingly.
Separate and apart from that.
And any of you know in the past we've had relationships with Mega artist, whether they be musicians or Hollywood studios and the like and again the the the least common denominator there is having access to a massive customer base.
Uhm is interested in this sort of content that they are offering and this is another consumption platform clearly from you know the mega artists the ability to in access to a customer that may choose to.
Take a wallpaper or a ringtone and put that on your home screen or on their lock screen is a huge opportunity because it reinforces that artists Bran you know maybe 100 times a day, if it's the home screen or every time the phone rings. It says.
It's a ringtone accordingly.
And that is not something that many other platforms have the ability of delivering and makes <unk> stand out an attractive for you know those mega brands Accordingly.
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Mm, Thanks, and what one last question you you get commentary on physical twenty-two.
Uhm for revenue growth of 25% to 30%.
Can I get a little bit more color on.
The assumptions there you betcha coming off of you know [laughter] really tough base and the last last year.
Is that being conservative in terms of revenue growth based on what you already have sort of in the in the app It and the platform for how much of your your new strategic growth initiatives and different things like like social pieces on the app or factored into that.
Sure. So that that number really includes you know a analysis from what we believe we know across.
Any and all aspects of the business today and you know time will tell if we've been you know too conservative or if we've been too aggressive in proving those numbers out, but I can say that the overall you know budgeting process is one.
Which is very thorough we get all of our product managers involved and you know they go through several iterations, providing their assumptions those assumptions are vetted and then we also need to see to it that those assumptions align with resource investment so that.
You know if a product manager expect to roll out a particular feature set any particular period of time and that will impact revenue, we want to make sure that that aligns with what our resource availability allows for in that we've accounted for those resources M contingencies.
You know accordingly.
Okay awesome, yeah. Thanks for answering my questions. Congrats once again, the great quarter.
Really appreciate it thank you.
Thank you.
This concludes our questions answer session and conference call.
Thank you for attending today's presentation you may now disconnect.
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