Q4 2023 Zedge Inc Earnings Call
Ladies and gentlemen, thank you for your patience. This conference will begin shortly.
Once again, thank you for your patience on this conference will begin shortly.
[music].
Good afternoon, and welcome to Sages earnings conference call for fiscal fourth quarter and end of year 2023 results.
During managements prepared remarks, all participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.
After todays presentation by <unk> management, there will be an opportunity to ask questions.
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Although now turn the call over to Brian CFO, Sir you may begin.
Thank you operator, and today's presentation, Jonathan Reich, <unk>, Chief Executive Officer, you site, such as Chief Financial Officer will discuss <unk> financial and operating results that were reported today any forward looking statements made during this conference call during the prepared remarks or in the question and answer session, but the jet.
There are specific in nature are subject to risks and uncertainties that may cause actual results in the future to differ materially from those discussed on today's call.
These risks and uncertainties include but are not limited to specific risks and uncertainties disclosed in the reports because edge PERC periodically files with the SEC.
Seems no obligation to update any forward looking statements or to update the factors that may cause actual results to differ materially from those that they forecast.
Please note that our earnings release is available on the Investor Relations page of <unk> website. The earnings release has also been filed on form 8-K, with the SEC I would like to turn the call over to Jonathan.
Yes.
Good afternoon. Thank you, Brian and thank you all for joining us today.
I will start by briefly reviewing our fourth quarter results, which were generally in line with our expectations.
Q4 revenue decreased 10% from last year, while we encountered challenges stemming from the combination of geopolitical economic and industry specific issues, we observed ongoing stabilization in advertising with AD revenue remaining flat sequentially, even during the traditionally weaker.
Q4 period.
Furthermore, in Q4 of fiscal year 2022 we had a one time 4 million dollar accounting benefit skewing year over year earnings comparisons.
Other positive highlights from the quarter included 7% sequential growth in subscription revenue as our new iOS and overhauled Android offerings.
Contributed to positive momentum. Additionally, as Ed premiums gross transaction value or G. T V was up 14% year over year and down $26000 sequentially benefiting from paying users of paint our generative AI wallpaper maker.
All of this led to higher gross margin and sequential art MAU growth.
Finally, <unk> continued to build on its momentum throughout the year with revenue up nearly 70% versus last year.
Every year, we picked at least one company wide area of focus to overhaul in fiscal year 'twenty, three we address data and analytics and I'm happy to report that we achieved our goal of democratizing data.
The improvements we made empower our product marketing monetization finance and executive teams to access accurate and granular data more quickly and run experiments in concert with one another to more easily and quickly make data driven decisions as a part of this overhaul.
We expanded our data team and we are now very well positioned for continued evolution in a world that is ever dependent on data supremacy.
In fiscal 'twenty 'twenty four we are committed to building a full stack marketing team with capabilities spanning user acquisition branding creative creation marketing analytics and reporting competitive research content marketing App store and search engine optimization and Reengagement Mark.
Okay.
Though we already possess many of these skills. We're now bulking up in the areas. We haven't previously invested in.
Furthermore.
We are also using AI in our workflow to scale quickly and efficiently in light of the sea change that has occurred in the mobile app marketing space with Apple's I D say deprecation and the upcoming rollout of Google's privacy sandbox across Android It has become an imperative for app developers like us to itself.
And many marketing disciplines, we expect to increase our investment in paid user acquisition and enhance our expertise in all areas of the marketing staff to generate attractive return on ad spend or Ross.
<unk>.
A products perspective, we have multiple initiatives to enhance existing products and further diversify our portfolio.
From his edge marketplace, we will focus on expanding paint our generative AI wallpaper maker.
Our key priorities include the global rollout of paint, which may unleash high growth opportunities, especially in markets, where we are an early entrant. We also plan to offer paint on our website, enabling users to create all types of images not only wallpapers.
I want to underscore that our current iteration of paint opens new opportunities in the iOS ecosystem, where we can compete on equal footing in light of Apple openly welcoming this new technology. Finally in the second half of this year, we expect to introduce a standalone Janet AI App that will offer many more.
Abilities, and with Tom encompass more than images alone.
Beyond the iOS and Android, we plan to revamp our website, enabling users to access paint to create all types of images not only wallpapers.
Also test a print on demand capability, so that users can bring their creations into the real world.
I mentioned the edge plus how is edge marketplace subscription offering earlier I'm excited because of prospective subscribers are responding well to the overhaul evidenced by our subscription revenue going up on a sequential basis.
With ongoing investments not only in marketing, but also in testing subscription value ads and a variety of pricing skus we.
We hope to return to subscriber growth sooner rather than later.
Turning to give it a shot.
Unlike what we initially experienced with emergent PDR jewelry shops is taking more time to scale than we would prefer yet we remain confident in its long term prospects.
Although the gaming sectors based global and economic challenges the Thorniest issue relates to Apple's app transparency cracking framework, which severely limit the information that app marketers can secure to target prospective customers.
Although Apple released Scad network for data in order to enable growth with improved attribution tracking capabilities. The impact will be limited until major platforms like meta are successful and embedding this into their tech stack in the meantime, we are taking a two pronged approach to stabilizing guru shots.
And positioning it for growth first we focused on product innovation by rolling out battles, a new hybrid casual gameplay future.
For users to start competing in fast paced short duration and photo competitions. There are limited in size battles is important and will help make the guru shots game more accessible and relevant to a broader audience hopefully converting users into long term players. In addition, we are also evolving with the eighth.
Silicon based economy, and we will start introducing advertising supported experiences in early calendar 'twenty 'twenty four.
Second we are working closely with both Google and meta to adapt and expand realized positive paid user acquisition by optimizing against several inputs, including creators.
This will take time and resources.
Their algorithms optimize for relevant customers suffice it to say we are monitoring developments closely testing speaking with other publishers and keeping our ear close to the ground to invest wisely.
We are building an emergent periods fiscal 2023 success with continued innovation and plan to test features like emoji translations and mash ups, along with new content verticals like emoticons print on demand merchandising and hyper casual emoji games and places.
Beyond our three core product groups, we have soft launched the AIA art master in five countries.
And currently plan to expand globally over the next several months.
We believe the AAR master a hybrid casual Gen. AI game that enables users to create wowing content to compete against other players and fun fast paced competitions has the potential to be a fourth core product for us.
Art Master capitalizes on jewelry shops is mobile gaming expertise and the hottest tech trend Jan AI positioning AIG art Master at that center of the explosive growth.
That both the Gen AI and gaming sectors are experiencing.
Taken together, we believe that we have never been in a better position to create sustainable long term profitable growth given the combination of market opportunity, our current product portfolio and roadmap our marketing prowess.
Data capabilities Tech stack and most importantly, our team. Furthermore, we are not just talking about AI, we've already integrated it throughout our business, including product technology and marketing.
Additionally, we have a relatively untapped opportunity in the mobile gaming sector with Guru shots and AIA art Master that are based on our acquisition of ghoulish thoughts in 2022.
Before closing I want to underscore the Zed is fortunate to have grew shot as a member of our family as you know <unk> is headquartered in Tel Aviv and ZIP stands firmly with Israel. We are appalled by her losses barbaric behavior and our Hearts go out to the victims of Hammas's heinous attack and the victims.
Families and friends I want to thank our employees and remain humbled by your courage and commitment, especially in the face of terrorism rocket fire.
<unk> Mobilizations school closings and the like now I would like to turn the call over to E, who will review our financial results E.
Thank you Jonathan.
Starting with a full quarter result, MAU for that marketplace.
Defined as the number of unique users that opened that arent.
During the last 30 days of the period.
<unk> decreased three 4% from a year ago to 39 million.
MAU in well developed markets and emerging market were down six 8% and two 4% respectively.
Europe, which contribute to both metric continued to suffer from the Russian invasion of Ukraine and inflation.
Total revenue in the full quarter was $6 $6 million down 10% from last year.
This is a good idea surfaces, which encompasses revenue from Guru show came in at $1 million.
Down 29% from last year.
Similar to Q3, <unk> revenue was negatively impacted but have those ATT framework.
Macroeconomic issues and the geopolitical situation.
Subscription revenue for the quarter was down 3% versus last year.
However, this metric was up sequentially, our active subscriber trends improve.
And higher value subscription and our new value added service.
Plus offering for Haynesville.
We replaced lower costs legacy, some fruition, which only removed.
That's premium G. D V grew 14.3% from last year to $384000, reflecting incremental revenue generated from pain.
Which offset modest pecan and other content sales.
Average revenue per monthly active user although now was 5.5 cents a.
A decrease of five 5% year over year still this metric was up 4% sequentially.
Reflecting stability in AD pricing and a positive impact of our new S and enjoy subscription.
After backing out the one time 4 million accounting benefit in Q4 of last year.
Operating expenses were flat year over year at 5.1 million.
GAAP net income for Q4 was 0.2 million.
Operator: Ladies and gentlemen, thank you for your patience. This conference will begin shortly. Once again, thank you for your patience and this conference will begin shortly.
And EPS was one.
Adjusted EBITDA was $1.6 million.
Versus $2.2 million in the prior year period.
From a liquidity standpoint, we remain in a strong cash position with over $18 million in cash and cash equivalents and only $2 million in banking loan.
We repurchased 72000 class b share during the quarter and the weighted average price of $1 98 per share.
In total.
We bought back roughly 759000 of our class B common stock during fiscal 2023.
Thank you for listening to our fourth quarter earnings call and I look forward to speaking with you again on our next call in mid December operator back to you for Q&A.
Thank you.
We'll now begin the question and answer session.
Jonathan Reich: [inaudible] Q4 revenue decreased 10 percent from last year. While we encountered challenges stemming from the combination of geopolitical, economic, and industry-specific issues, we observed on-going stabilization and advertising, with ad revenue remaining flat sequentially, even during the traditionally weaker Q4 period. Furthermore, in Q4 of fiscal year 2022, we had a one-time, $4 million accounting benefit, skewing year-over-year earnings comparisons. Other positive highlights from the Q4 included 7 percent sequential growth in subscription revenue has our new iOS and overhauled Android offerings, contributed to positive momentum.
To ask a question you May Press Star then one on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press star two.
At this time, we will pause momentarily to assemble our roster.
Thank you.
Our first question is coming from Alan Klee.
From Maxim Group, Sir your line is life.
Yes, hi, good quarter, and our thoughts are with your employers gewirtz trucks.
I wanted to start with.
With apples.
Privacy rules now and the actions that.
Big sites like Facebook or using how how do you think about.
This is going to play out in terms of.
The potential timing of the effectiveness of the advertising to improve overtime.
Hi, Alan Thank you. Thank.
Thank you for your thoughts we appreciate that in terms of timing.
So I think the 64000 dollar question, but the 64.
Million dollar question.
As you know.
As far as we're concerned hill platform is like meta or Facebook have fully implemented.
A working version and scan for.
It is going to be.
Complicated to scale effective.
Advertising.
Having the data there.
To drive.
Better marketing decisions.
I think that you know the meta had rolled out a version of scan for most probably around a month and a half two months ago, and then quickly had to reverse that introduction.
Reading between the lines it was likely not yet ready for prime time.
And I can only imagine that this is.
Amongst one of the highest priorities for.
<unk> business.
Having said that and.
As I described during the call we are using other <unk>.
Mechanisms in order to optimize.
Whether it would be.
Rapidly and materially increasing the number of creative that we have.
Using all sorts of different creative styles.
So as an example, UGC videos or promotional videos and things of that sort.
Coupled with.
Spending based upon where we are seeing an appropriate return on ad spend.
Can.
Jonathan Reich: Additionally, Zedge Premium's gross transaction value, or GTV, was up 14 percent year-over-year and down $26,000 sequentially, benefiting from paying users of paint, our generative AI, wallpaper maker. All of this led to higher gross margin and sequential ARP-MAL growth. Finally, a Mojipedia continued to build on its momentum throughout the year, with revenue up nearly 70 percent versus last year.
Sure you that as soon as Facebook is or Matt is ready to.
Implement this at scale that we are.
We will.
Jump on that bandwagon and begin to capitalize on the introduction of scan for.
I also think it's important to mention that we have.
Become what I would call a managed account customers of both matter and Google.
Jonathan Reich: Every year, we picked at least one company-wide area of focus to overhaul. In fiscal year 23, we addressed data and analytics, and I'm happy to report that we achieved our goal of democratizing data. The improvements we made in power are product-marketing, monetization, finance, and executive teams to access accurate and granular data more quickly and run experiments in concert with one another to more easily and quickly make data-driven decisions. As a part of this overhaul, we expanded our data team, and we are now very well positioned for continued evolution in a world that is ever-dependent on data supremacy.
Meaning that there are dedicated.
Camp managers with subject matter expertise that are overseeing our accounts working closely with our team in terms of helping us expand.
Hi.
The marketing initiatives that we have and in Aro ROI, our Ros positive fashion.
And I would just underscore.
In light of.
The downsizing that meta had undertaken this year.
I view that as I view. The fact that we are quote unquote. This man has its managed account status that is indicative of how interested they are in our business and how we can scale with them.
Jonathan Reich: In fiscal 2024, we are committed to building a full-stack marketing team with capabilities spanning user acquisition, branding, creative creation, marketing analytics, and reporting, competitive research, content marketing, app stored, and search engine optimization, and re-engagement marketing. Though we already possess many of these skills, we're now bulking up in the areas we haven't previously invested in. Furthermore, we are also using AI in our workflow to scale quickly and efficiently, and light of the sea change that has occurred in the mobile app marketing space, with Apple's IDFA deprecation and the upcoming rollout of Google's privacy sandbox across Android, it has become imperative for app developers like us to excel in many marketing disciplines. We expect to increase our investment in paid user acquisition and enhance our expertise in all areas of the marketing stack to generate attractive return on ad spend or ROAS efficiently.
I hope that answered your question.
Okay that was great. Thank you.
You've mentioned a lot of initiatives for <unk>.
Fiscal 'twenty four.
What would you say are kind of at the top.
Top ones that you think would.
Potentially have an impact on.
<unk> 24, and 20 fives financials.
Sure. So let's take a look at each of the business units.
The flagship Zara green tons, and wallpaper business unit.
We are.
Really.
Investing a tremendous amount of effort in terms of.
Improving our subscription offering and as you know the financials.
Associated with subscriptions are very attractive.
Not only is.
Is the <unk>.
Profit margin.
Attractive, but we also received a cash upfront.
Jonathan Reich: From a product perspective, we have multiple initiatives to enhance existing products and further diversify our portfolio. From the Zedge marketplace, we will focus on expanding paint our generative AI wallpaper mix.
Alright, just the notion of having rolled out an iOS subscription.
<unk>, which is having a meaningful impact and I would note that in the U S.
B.
Price point for an iOS subscription is around $20.
Jonathan Reich: Director. Our key priorities include the global rollout of paint, which may unleash high-growth opportunities, especially in markets where we are in early interest. We also plan to offer paint on our website, enabling users to create all types of images, not only wallpapers.
Per customer that is.
The retail value if you will.
Compared to.
Android, which is around $5 per an annual subscription so.
Very very significant increase.
Jonathan Reich: I want to underscore that our current iteration of paint opens new opportunities in the iOS ecosystem, where we can compete on equal footing in light of Apple openly welcoming this new technology. Finally, in the second half of this year, we expect to introduce a standalone Gen AI app that will offer many more capabilities and with time and confidence more than images alone. Beyond iOS and Android, we plan to revamp our website, enabling users to access paint to create all types of images, not only wallpapers. We also test a print on demand capability so that users can bring their creations into the real world.
It's more than simply.
Price testing in coming up with the.
Sure.
Price that resonates with users. It's also the value adds in there as well.
Whole bunch of them.
Work being done there in addition to.
Our marketing efforts.
Then.
In respect to the flagship as well.
We are continuing to invest in paint.
As our Gen AI wallpaper maker.
Rolling that out on a global basis.
And.
We may see some accelerated growth there in markets, where we are.
Jonathan Reich: I mentioned Zedge Plus, our Zedge marketplace subscription offering earlier. I'm excited because prospective subscribers are responding well to the overhaul evidenced by our subscription revenue going up on a sequential basis. With ongoing investments, not only in marketing, but also in testing subscription value ads and a variety of pricing skews, we hope to return to subscriber growth sooner rather than later.
Early.
Many of the Gen AI apps today that are in this space.
Use a subscription business model.
Which doesn't necessarily align well with.
Many of the markets that are outside.
Outside of.
United States, Canada, UK, Australia as an example.
Jonathan Reich: Turning to Guru Shots. Not unlike what we initially experienced with a Mojipedia, Guru Shots is taking more time to scale than we would prefer. Yet, we remain confident in its long-term prospects.
So when you get into the more.
Emerging market community.
That is.
The notion of subscriptions is less palatable, so theres a lot of.
Jonathan Reich: Although the gaming sector is faced global and economic challenges, the thorniest issue relates to Apple's app transparency tracking framework, which severely limits the information that app marketers can secure to target prospective customers. Although Apple released SCAD's network 4.0 in order to enable growth with improved attribution tracking capabilities, the impact will be limited until major platforms like Mehta are successful in embedding this into their tech stack.
Work going on.
In terms of making this available and continuing to improve the experience.
So we may have.
<unk>.
Early mover advantage.
We're successful there.
And then I had mentioned that we're also working on a standalone AI app.
And.
The notion there is to have.
Jonathan Reich: In the meantime, we are taking a two-pronged approach to stabilizing Guru Shots and positioning it for growth. First, we focused on product innovation by rolling out battles, a new hybrid casual gameplay feature, for users to start competing in fast-paced, short-duration photo competitions that are very important and will help make the Guru Shots game more accessible and relevant to a broader audience, hopefully converting users into long-term players. In addition, we are also evolving with a token-based economy and will start introducing advertising-supported experiences in early calendar 2024.
And App, which is not only.
Wallpaper, driven by image driven and other potential forms of content that has a much more intuitive user interface and.
Which allows for us to.
Wow.
<unk> market the notion of Gen AI as opposed to that being a feature within our app.
And.
Then also this introduction of paints to our website.
That should be available in the next couple of weeks, so a lot of effort going into that.
Moving to.
Jonathan Reich: Second, we are working closely with both Google and Mehta to adapt and expand robust positive paid user acquisition by optimizing against several inputs including creatives. This will take time and resources as their algorithms optimize for relevant customers. Suffice it to say, we are monitoring developments closely, testing, speaking with other publishers, and keeping our ear close to the ground to invest-wise.
Guru shocks.
The.
Two.
Drivers are immigrants shocks game itself the introduction of battles.
And using battles as a mechanism to improve engagement.
As well as attract and open up.
The top of the funnel to bring in customers that.
Jonathan Reich: Wesley. We are building on EmojiPedia's fiscal 2023 success with continued innovation and planned to test features like emoji translations and mashups along with new content verticals like emoticons, print on demand merchandising, and hyper casual emoji games and quizzes. Beyond our three core product groups, we have soft launch, the AI art master in five countries, and currently plan to expand globally over the next several months.
I would want to get a sense for what.
Photo competitions are but with a much lower much easier.
Barrier in terms of learning curve.
And.
That is what is happening there with this sort of hybrid casual.
Experience.
And we continue to believe that.
That will.
Jonathan Reich: We believe AI art master a hybrid casual Gen AI game that enabled users to create wowing content to compete against other players in fun fast-paced competitions has the potential to be a fourth-core product for us. AI art master capitalizes on guru-shotzes, mobile gaming expertise, and the hottest tech trend, Gen AI positioning AI art master at the center of the explosive growth that both the Gen AI and gaming specters are experiencing. Taken together, we believe that we have never been in a better position to create sustainable long-term profitable growth given the combination of market opportunity, our current product portfolio and road map, our marketing prowess, data capabilities, tech stack, and most importantly our team.
Unlock growth for us.
And then the brand new AI Art Master game, which is 100% hybrid casual.
And tapped into.
The growth of not only gen AI, but also growth in the gaming space.
So looking out over the course of the next two fiscal years.
We are really.
Tried to.
Deliver that promise to the marketplace.
And our market I should say to investors and then finally in America PDL.
So we've seen some substantial revenue growth year over year and.
Our ability to continue to add functionality brought in.
The focus of our motive PDR to new content types and introduce Enhancers for example.
Jonathan Reich: Furthermore, we are not just talking about AI, we have already integrated it throughout our business, including product, technology, and marketing. Additionally, we have a relatively untapped opportunity in the mobile gaming sector with guru-shots and AI art master that are based on our acquisition of guru-shots in 2022.
We think that that can continue to drive incremental growth to that business unit.
Thank you.
<unk>.
In terms of.
Jonathan Reich: Before closing, I want to underscore that Zed is fortunate to have guru-shots as a member of our family. As you know, guru-shots is headquartered in Tel Aviv and Zed stands firmly with Israel. We are appalled by Hamas's barbaric behavior and our hearts go out to the victims of Hamas's heinous attack and the victims, families, and friends.
Last quarter, you mentioned that you were initiating a two and a half to 3 million cost cutting initiatives.
Thats, what the benefit you would get annually I think as any.
Has that happened already or in any update on that.
Sure. So we had.
Analysis will not last quarter I think it was.
Jonathan Reich: I want to thank our employees and remain humbled by your courage and commitment, especially in the face of terrorism, rocket fire, army mobilizations, school closings, and the like.
Two to three quarters ago.
Yes, we had.
No.
We have acted on that including <unk>.
Jonathan Reich: Now, I would like to turn the call over to E who will review our financial results. E. Thank you, Jonathan.
A host of different initiatives from.
SaaS infrastructure too.
Sure.
Staffing as you know we've got employees different regions of the world.
E: Starting with our full quarter result. Now, for the Zed's marketplace, defined as the number of unique users that opened the Zed's app during the last 30 days of the period, decreased 3.4% from a year ago to 30.9 million. Now, in oil-developed markets and emerging markets, we're down 6.8% and 2.4% respectively. Europe would contribute to bold metric, continue to suffer from the Russian invasion of Ukraine and inflation.
Price points and the like to.
<unk>.
Our marketing investment and so on and so forth.
And.
Uh huh.
Have acted on that.
And we will continue to.
Keep in mind, we want to be in a position where ultimately our cash position continues to grow and that we're not getting too far ahead of ourselves in terms of.
Yes.
Expanding initiatives or.
See how.
Having SG&A.
<unk>.
Grow at a unsustainable pace I just want to underscore I think it's very important when taking a look at SG&A to remember that within SG&A, we have both our marketing expense as well as the percentage that whether it be Google or Apple keeps.
E: Total revenue in the full quarter was $6.6 million down 10% from last year. This is a good and surfaces, which encompasses revenue from Guru Shaq came in at $1 million, down 29% from last year. Similar to Q3, Guru Shaq revenue was negative impact by Apple's ATT framework, macroeconomic issues, and geopolitical situation. Substitution revenue for the quarter was down 3% versus last year. However, this metric was up sequentially as our active subscriber train improved.
When a user spends money on their platform. So SG&A is expected to grow but that is.
<unk> marketing and that growth is.
Something that we can expand or contract based upon rollouts.
The other thing that I think it's important to talk about when considering marketing in our growth plan is the fact that.
Marketing is a much different animal than it was three.
E: And higher value IOS suppression and our new value added Zedge plus offering for Android replaced lower cost legacy suppression, which only removed ads. Zedge premium GDP grew 14.3% from last year to $384,000, reflecting incremental revenue generated from pain, which offset modest decline in other content sales. Average revenue per monthly active user of ATT now was 5.5 cents. A decrease of 5.5% year over year, still this metric was up 4% sequentially. Reflecting stability in ad pricing in a positive impact of our new IOS and Android subscription.
Three four years ago, because of all the privacy stuff, whether it would be.
ATT with Apple or soon to be Google's privacy sandbox.
And.
That will mean that it will take.
More time to get.
Recurring results that one can then I'll say with confidence we can expand or this is not the right thing to optimize against.
However.
As I've also mentioned in my recorded remarks.
We have prioritized for the entire company.
Really building out this full stack.
Marketing.
Team.
And seeing to it that we address not only paid user acquisition expertise.
But also things like App store optimization and search engine optimization branding.
E: Up to packing now the one-time 4 million, accounting benefit in Q4 last year, operating expenses will flat over year at $5.1 million. Gap gaining income for Q4 was 0.2 million, and EPS was 1 cents. Adjusted EBITDA was $1.6 million versus $2.2 million in the prior year period. From a liquidity standpoint, we remain in a strong cash position with over $18 million in cash and cash equivalent. Only 2 million in bank loan. We repurchased 72,000 cloud speed share during a quarter, and it weighted average price of $1.98 per share in total.
Product marketing.
A couple of those.
<unk>.
So that is what we believe to be critical for beyond.
<unk> growing success.
Our business.
Okay.
Thank you.
For fiscal 'twenty four.
I think historically, the first quarters seasonally slower quarter and would you agree that that's most likely maybe talk about that just the seasonality.
That typically plays out in the quarters and.
<unk>.
Is there anything you wanted to comment on of.
Financial outlook or goals of.
Any type of financial goals for fiscal 'twenty four thank you.
Sure. So we have historically not provided projections I will say that seasonality because we have a.
E: We bought back roughly $7.59,000 of our look forward to speaking with you again on the next call in mid-December.
Very very large percentage of revenue coming from advertising.
Is tied to AD spend typically in the holiday season.
So our fiscal Q2, which is November December January is typically the strongest quarter.
Operator: Operator back to you for Q&A. Thank you.
Operator: We will now begin the question and answer session. To ask a question, you may press star, then one on your touch tone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. If you would draw your question, please press star 2. At this time, we will pause momentarily to assemble our roster. Thank you.
Of the year.
And then when you get into.
Calendar.
Let's say calendar.
Q2.
Our Q1 I should say if you can see a downturn so.
Although were technically a month off generally speaking seasonality for <unk>.
Allen Klee: Our first question is coming from Allen Klee from Maxim Group. Sir, your line is nice. Yes, hi.
<unk> been aligns with what happens in a typical AD driven.
<unk>.
And.
Jonathan Reich: Good quarter, and our thoughts are with your employees at Goober's Trust. I wanted to start with Apple's privacy rules now and the actions that big sites like Facebook are using. How do you think about how this is going to play out in terms of the potential timing of the effectiveness of the advertising to improve over time? Hi, Allen. Thank you. Thank you for your thoughts. We appreciate that. In terms of timing, that's I think the not $64,000 question, but the $64 million question.
That generally holds up it's not 100% the case, but that generally is an indication of how our business is impacted.
We are fortunate because.
We do have other diversification, our rehab diversification with the subscriptions in there and so on and so forth and that subscription revenue as you know is amortized over the life of that subscription.
So going back to my earlier comment our ability to continue to have success with our overhaul subscription offering for Android or the new newly introduced iOS subscription offering is something which is really.
A key part two.
Our ability to diversify revenue and.
And have some insulation there if you will.
Jonathan Reich: As far as work concerned, until all platforms like Metta or Facebook have fully implemented a working version of scan 4, it is going to be complicated to scale effective advertising without having the data there to drive better marketing decisions. I think that you know that Metta had rolled out a version of scan 4, most probably around a month and a half, two months ago, and then quickly had to reverse that introduction.
Thank you.
Okay.
One of the other things you mentioned was.
As a priority as an initiative for fiscal 'twenty for us.
Building out your marketing capabilities.
Could you maybe just expand a little more than that on what you meant by that.
Sure.
Prior to the acquisition of <unk>.
<unk> shots.
Z as growth was.
Jonathan Reich: Reading between the lines, it was likely not yet ready for prompting. I can only imagine that this is amongst one of the highest priorities for their business. Having said that, and as I described during the call, we are using other mechanisms in order to optimize whether it be rapidly and materially increasing the number of creatives that we have, using all sorts of different creative styles. So as an example, UDC videos or promotional videos and things of that sort, coupled with fending based upon where we are seeing an appropriate return on that spent, I can assure you that as soon as Facebook is or Metta is ready to implement this at scale, that we will jump on that bandwagon and begin to capitalize on the introduction of scan 4.
Primarily driven by organic.
Installs.
Sure.
You know that.
Surpassed.
In aggregate over 600 million installs of our App on a global basis.
And.
The acquisition of Guru shocks introduced.
A.
New facet to marketing where in the mobile gaming space.
Paid user acquisition is a.
Key growth driver.
Hi.
And in parallel with that we.
<unk> had also started to dip our toe in the market with respect to paid user acquisition.
In our flagship Zed.
Marketplace.
And.
We have expanded that.
Investment over time with her.
What we believe to be.
<unk>.
Return on AD spend investment.
Much different profile between does edge marketplace.
Jonathan Reich: I also think it's important to mention that we have become what I will call a manifest account customer as a both Metta and Google, meeting that they are dedicated, with account managers with subject matter expertise that are overseeing our accounts working closely with our team in terms of helping us expand the marketing initiatives that we have in an ROI or a positive fashion. And I would just underscore in light of the fanficizing that META had undertaken this year.
Random search app.
For paid user acquisition versus jewelry shops.
But in order to be successful in.
In.
Our.
Investment in.
Marketing.
We have.
Many different.
Areas that we are refining and.
We are investing and so as I had mentioned earlier not only.
Building out.
A stellar.
User acquisition team, that's focused on both paid and organic channels.
Jonathan Reich: I view that as I do the fact that we are quote unquote this has managed the accounts that is indicative of how interested they are in our business and how we can scale with them. I hope that answers your question.
But touching upon the fiscal 2023 goal overhauling data and analytics.
We need <unk>.
Very very precise reporting so that we can make good.
Allen Klee: That was great. Thank you.
Advertising decisions or user acquisition decisions.
Jonathan Reich: You mentioned a lot of initiatives for fiscal 24. What would you say are kind of the top ones that you think would potentially have an impact on 24 and 25 financials? Sure. So let's take a look at each of the business units, the flagship Z drink tones and wallpaper business unit. We are really investing a tremendous amount of effort in terms of improving our subscription offering. And as you know, financials associated with subscriptions are very attractive.
Investing in things like App store optimization search engine optimization messaging and re engagement marketing content marketing and then also taking advantage of.
Various forms of tech that can provide us with.
Additional information or can help us in terms of content creation and things of that sort all become.
Critical too.
This investment that we're making.
That is.
I think the next.
One of the areas that.
When looking back in a year or two years from now we're going to see just having a much more robust team. We started with one person we have more than that clearly now.
Jonathan Reich: Not only is the profit margin attractive, but we also received the cash upfront just the notion of having ruled out an iOS subscription is something which is having a meaningful impact. And I would note that in the US, the price point for an iOS subscription is around $20 per customer that is, you know, the retail value, if you will, compared to Android, which is around $5 per annual subscription. So very, very significant increase.
And.
That is a critical part of.
Our ability to.
Grow the company.
Okay very good answer okay, well. Thank you so much I appreciate it.
Thank you.
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Okay.
Jonathan Reich: But it's more than simply price testing and coming up with the price that resonates with users. It's also the value ads and there's a whole bunch of work being done there in addition to marketing efforts. Then in respect to the flagship as well, we are continuing to invest in paint, which is our Gen AI wallpaper maker rolling that out on a global basis. And we may see some accelerated growth there in markets where we are, you know, early.
Jonathan Reich: Many of the Gen AI apps today that are in this space, use a subscription business model, which doesn't necessarily align well with many of the markets that are. Outside of the United States, Canada, UK, Australia as an example. So when you get into the more emerging market community that is the notion of subscriptions is less palatable. So there's a lot of work going on in terms of making this available and continuing to improve the experience.
Jonathan Reich: So we may have some early mover advantage if it's more successful there. And then I mentioned that we're also working on a standalone AI app, and the notion there is to have an app which is not only wallpaper driven, but image driven and other potential forms of content that has a much more intuitive user interface and which allows for us to really market the notion of GNI is opposed to that being a feature within our app.
Jonathan Reich: And then also this introduction of paint to our website that should be available in the next couple of weeks. So a lot of effort going into that. Moving to Guru Shots, I take two drivers are in the Guru Shots game itself, the introduction of battles. And using battles is a mechanism to improve engagement, as well as attract and open up the top of the funnel to bring in customers that would want to get a sense for what photo competitions are, but with a much lower, much easier barrier in terms of learning her.
Jonathan Reich: And that is what is happening there with the sort of hybrid casual experience. And we continue to believe that that will unlock growth for us. And then the brand new AI Art Master game, which is 100% hybrid casual and packed into the growth of not only GNI, but also growth in the gaming space. So looking out over the course of the next two fiscal years, we are really tried to deliver that promise to the marketplace.
Jonathan Reich: And, or for the market, I should say to investors. And then finally, in a Mojipedia, so we've seen some substantial revenue growth year over year. And our ability to continue to add functionality brought in the focus of a Mojipedia to new content types and introduce enhancers. For example, POD, we think that that can continue to drive incremental growth to that business. Unit. Thank you.
Jonathan Reich: In terms of the last quarter you mentioned that you were initiating a two and a half to three million cost-cutting initiatives or that's what the benefit you would get annually, I think, has that happened already or any update on that? First, so we had announced this would not last quarter, I think it was two to three quarters ago. Yes, we had acted on that, including a host of different initiatives from SaaS infrastructure to staffing.
Jonathan Reich: As you know we've got employees different regions of the world, different price points and the like to our marketing, investment and so on and so forth. And we have acted on that and we will continue to keep in mind, we want to be in a position where ultimately our cash position continues to grow and that we're not getting too far ahead of ourselves in terms of expanding the initiatives or having SGNA grow at an unsustainable pace.
Jonathan Reich: I just want to though underscore, I think it's very important when taking a look at SGNA to remember that within SGNA, we have both our marketing expense as well as the percentage that whether it be Google or Apple keeps when a user spends money on their platform. So SGNA is expected to grow but that is, you know, tied to marketing and that growth is something that we can expand or contract based upon ROAS.
Jonathan Reich: The other thing that I think it's important to talk about when considering marketing in our growth plan is the fact that marketing is a much different animal than it was three, four years ago because of all the privacy stuff, whether it be ATT with Apple or soon to the Google's privacy stance fan box and that will mean that it will take more time to get recurring results that one can then say with confidence, hey, we can expand or this is not the right thing to optimize against. However, as I've also mentioned in my recorded remarks, we have prioritized for the entire company the notion of really building out this full stack marketing team and seeing through it that we address not only pay user acquisition expertise but also things like App Store optimization, search engine optimization, branding, product marketing, just to name a couple of those components.
Jonathan Reich: So that is what we believe to be critical for beyond growing success of our business. Thank you for fiscal 24. I think historically the first quarter is a seasonally slower quarter. Would you agree that that's most likely? Maybe talk about that just the seasonality, how that typically plays out in the quarters, and is there anything you wanted to comment on of financial outlooks or goals of just any type of financial goals for fiscal 24?
Jonathan Reich: Thank you. Sure, so you know we historically not provided projections. I will say that seasonality because we have a very, very large percentage of the season, typically in the holiday season. So our fiscal Q2, which is November, December, January, typically the strongest quarter of the year. And then when you get into calendar, you know, let's say calendar Q2 use or Q1, I should say, you begin to see downturn. So although we're technically a month off, generally speaking seasonality for, you know, at spend aligns with what happens in a typical ad-driven business.
Jonathan Reich: And that generally holds up. It's not 100% the case, but that generally is an indication of how our business is impacted. We are fortunate because we do have other diversification, or we have diversification with the subscriptions in there and so on and so forth. And that subscription revenue, as you know, is amortized over the life of that subscription. So going back to my earlier comment, our ability to continue to have success with our overhaul subscription offering for Android or the newly introduced iOS subscription offering is something which is really a key part to our ability to diversify revenue and have some insulation there, if you will. Thank you.
Jonathan Reich: One of the other things you mentioned was as an initiative for fiscal 24 is building out your marketing, capable abilities. Could you maybe just expand a little more on what you meant by that? Sure. Prior to the acquisition of guru shots, that his growth was primarily driven by organic, in installs where you know that we surpassed, oh, and aggregate over 600 million installs of our app on a global basis. And the acquisition of Guru Shots introduced a new facet to marketing, where in the mobile gaming space, paid user acquisition is a key growth driver.
Jonathan Reich: And in parallel with that, we had also started to defer to in the market with respect to paid user acquisition in our flagship Zedge marketplace. And we have expanded that investment over time with what we believe to be attractive return on ads and investment. Much different profile between the Zedge marketplace around Zedge app for paid user acquisition versus Guru Shots, but in order to be successful in our investment in marketing, we have many different areas that we are refining and we are investing in.
Jonathan Reich: So as I mentioned earlier, not only building out a spell or user acquisition team that's focused on both paid and organic channels, but touching upon the fiscal 2023 goal of overhauling data and analytics, we need very, very precise reporting so that we can make good advertising decisions or user acquisition decisions investing in things like app store optimization, search engine optimization, messaging and reengagement, marketing, content marketing, and then also taking advantage of various forms of tech that can provide us with additional information or can help us in terms of content creation and things of that sort all become critical to this investment that we're making. So that is, I think the next one of the areas that when looking back in a year or two years from now, we're going to see, you know, just having a much more robust team. We started with one person, we have more than that, you know, clearly now. And that is a critical part of our ability to, you know, grow the company.
Allen Klee: Okay, very good answer. Okay, well, thank you so much. I appreciate it. Thank you.
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