Q2 2024 Zedge Inc Earnings Call

Operator: Good morning, everyone. Please remain on the line. Your conference will begin at approximately after the hour.

Good morning, everyone. Please remain on the line your conference will begin at approximately two minutes. After the hour. Please remain on the line. Your conference will begin at approximately two minutes after the hour. Thank you.

Operator: Your conference will begin at approximately 1 o'clock, after the hour. Thank you. Yi Tsai, Brian Siegel, Zedge, Brian Siegel, Jonathan Reich, Yi Tsai, Brian Siegel, Zedge, Brian Siegel, Jonathan Reich, Yi Tsai, Brian Siegel, Zedge, Brian Siegel, Jonathan Reich, Yi Tsai, Brian Siegel, Zedge, Brian Siegel, Jonathan Reich, Yi Tsai, Brian Siegel, Zedge, Brian Siegel, Jonathan Reich, During management's prepared remarks, all participants will be in a listen-only mode.

Okay.

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Good day and welcome to <unk> earnings Conference call for the second fiscal quarter 'twenty 'twenty four of results.

Management's prepared remarks, all participants will be in a listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation by <unk> management, there will be an opportunity to ask questions to ask a question. Please press Star then one on your touch.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation by Zedge's 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. I will now turn the call over to your host, Brian. The floor is yours.

On phone to withdraw your question. Please press star two.

I'll now turn the call over to your host Bryan Siegal the floor is yours.

Brian S. Siegel: Thank you, Operator. In today's presentation, Jonathan Reich, Zedge's Chief Executive Officer, and Yi Tsai, Zedge's Chief Financial Officer, will discuss Zedge's 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, whether general or 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 Zedge periodically files with the S&P. Zedge assumes no obligation to update any forward-looking Please note that our earnings release is available on the Investor Relations page on the Zedge website. The earnings release has also been filed on Form 8K with the SEC. I would like to turn the call over to Jonathan.

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 and the forward looking statements made during this conference call during the prepared remarks or in the question answer session, whether general or specific.

Civic 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 our reports as edge pared periodically files with the SEC.

This assumes 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 on <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 Good morning. Thank you, Brian and thank you all for joining US today I will begin by briefly reviewing our second quarter results demonstrated.

Jonathan Reich: Good morning. Thank you, Brian, and thank you all for joining us today. I will begin by briefly reviewing our second quarter results, demonstrating how our fiscal year 2023 investments have positioned us for sustainable long-term growth. Q2 revenue increased 11% from last year as we continued managing the geopolitical, macroeconomic, and industry-specific challenges spanning the landscape. One of the big stories this past quarter was continued momentum at the Zedge marketplace. Ad revenue was up 18% from last year.

How our fiscal year 2023 investments have positioned us for sustainable long term growth.

Q2 revenue increased 11% from last year as we continued managing the geopolitical macroeconomic and industry specific challenges spanning the landscape.

One of the Big story. This past quarter was continued momentum at this edge marketplace AD revenue was up 18% from last year.

Jonathan Reich: ZedgePlus, our marketplace subscription offering, delivered exciting results with revenue increasing 24% from last year with small net subscriber gains sequentially and less than 1% net subscriber loss year over year, and Zedge premium revenue, driven by several improvements to content, monetization, and other back and front-end items, was up 21%. These factors fueled a 37% increase in the average revenue per monthly active user, or ARPMAU, to a record $0. And this strength was not just on Android, as iOS revenue for the Zedge marketplace was up an impressive 46% sequentially. I should add that many of these trends are holding up at the halfway point of our fiscal third quarter. At the beginning of this fiscal year, we said building a full-stack marketing team would be our key corporate-wide initiative, similar to what we accomplished with data and analytics in fiscal 2023.

Plus our marketplace subscription offering deliberate exciting results with revenue increasing 24% from last year with small net subscriber gains sequentially.

In less than 1% net subscriber loss year over year and that premium revenue driven by several improvements to content monetization and other back and front end items was up 21%. These.

These factors fueled a 37% increase in the average revenue per monthly active user or arc map to a record 7.2 cents.

And this strength was not just on Android as iOS revenue for these edge marketplace was up an impressive 46% sequentially.

I should add that many of these trends are holding up at the halfway point of our fiscal third quarter at.

At the beginning of this fiscal year, we said building a full stack marketing team would be our key corporate wide initiatives similar to what we accomplished with data and analytics in fiscal 'twenty to 'twenty three.

Jonathan Reich: We're well on our way here, and our efforts are starting to bear fruit, especially for the Zedge market. Another important story this quarter relates to maturing our product development organization to drive innovation, accelerate product diversification, and consolidate resources to ensure long-term success. To that end, we have assembled an all-star team of seasoned gaming experts who are alumni of the leading mobile gaming publishers and have turned them loose on guru shots.

We're well on our way here and our efforts are starting to bear fruit, especially for these edge marketplace.

Other important story this quarter relates to maturing our product development organization to drive innovation and accelerate product diversification and consolidate resources to ensure long term success to that end, we have assembled an all star team of seasoned gaming experts, who are alumni of the leading mobile.

Aiming publishers and have turned them loose on very shots. Their mandate is to unleash the growth that was core to our investment thesis at the time of the acquisition.

Jonathan Reich: Their mandate is to unleash the growth that was core to our investment thesis at the time of the acquisition. This team is already sprinting, having overhauled the product roadmap with four major focus areas. The first is feature development, which hasn't been given the attention it deserves since the acquisition. In the past, successful new features would yield a 10-30% jump in revenues, with little or no downside when they didn't take hold. The updated product roadmap is full of new features designed to drive revenue and make GuruShots more accessible to an even broader audience. Next, our decision to focus on innovation will allow us to drive user growth by investing our marketing dollars more efficiently. Specifically, we will better couple Guru Shastra's UA spend with feature release.

This team is already sprinting, having overhauled the product road map with four major focus areas. The first is feature development, which hasn't been given the attention it deserves since the acquisition.

In the past successful new features would yield a 10% to 30% jump in revenues with little or no downside when they didn't take hold.

The updated product roadmap is full of new features designed to drive revenue and make guru shots more accessible to an even broader audience.

Next our decision to focus on innovation will allow us to drive user growth by investing our marketing dollars more efficiently specifically, we will better a couple of girls shots as UA spend.

With feature releases in January we introduced turbo he feature that expands the gameplay and improves game resource consumption to date. It has yielded a 15% increase in average daily revenue, giving me confidence that we are on the right track. Additionally, we are.

Jonathan Reich: In January, we introduced Turbo, a feature that expands the gameplay and improves game resource consumption. To date, it has yielded a 15% increase in average daily revenue, giving me confidence that we are on the right track. Additionally, we are about to release another new feature, Flash Challenges, a short-duration photo challenge that limits the number of participants per challenge and provides even more opportunities for users to win.

Bachelor released another new feature.

<unk> challenges, a short duration and photo challenge that limits the number of participants per challenge and provides even more opportunities for users to win we believe that this dynamic will drive up engagement and make dinner shots more accessible to a broader set of players both existing and new.

Jonathan Reich: We believe that this dynamic will drive up engagement and make GuruShots more accessible to a broader set of players, both existing and new. In parallel, the team is reinventing the game economy by converting it to a coin-based economy, supporting multiple currencies, and foregoing the existing economy, which we believe is too rigid and limited in terms of the number of ways players can earn and spend in-game resources. This change will open an array of customer value adds.

In parallel the team is reinvesting in the game economy by converting to a coin based economy supporting multiple currencies and foregoing in the existing economy, which we believe is too rigid and limited in terms of the number of ways players can earn and spend in game resources.

This change will open an array of customer value adds for example, we will be able to reward all players with game currency and manage resource consumption in a fashion that optimizes further coin purchases.

Jonathan Reich: For example, we will be able to reward all players with game currency and manage resource consumption in a fashion that optimizes further coin purchasing. Creating a comprehensive and inviting onboarding funnel is also a key focus area for the Guru Shots game. In short, onboarding will enable newbies to immediately experience gameplay in a simplified manner with a limited number of competitors, increasing the chances of winning.

Creating a comprehensive and inviting onboarding funnel is also a key focus area for the Guru shots game in short Onboarding will enable movies to immediately experienced gameplay and a simplified manner with a limited number of competitors, increasing the chances of winning the funnel will allow play.

Jonathan Reich: The funnel will allow players to progress with more features and increased complexity based on individual performance, enabling skill-based user segmentation, which will be a win for the user base. I want to add that we believe these efforts, taken in concert with one another, will help us deliver growth, which was one of the key promises of the acquisition. Guru Shots is the leading photo competition game, and more than 150 million photos have been used to play the game.

As to progress with more features and increased complexity based on individual performance, enabling school based user segmentation.

Which will be a win for the user base.

I want to add that we believe these efforts taken in concert with one another will help us deliver growth, which was one of the key theses of the acquisition.

Guru shots as the leading photo competition game and more than 150 million photos had been used to play the game photography continues growing exponentially due to the ubiquity of mobile phones and with the advent of AI enhancements of high quality pictures are within every one to reach the game play is.

Jonathan Reich: Photography continues to grow exponentially due to the ubiquity of mobile phones, and with the advent of AI enhancement, high-quality pictures are within everyone's reach. The gameplay is fun, and it touches on the human inner psyche, where people like to have fun, compete, and win.

Fun and it touches on the human inner psyche, where people like to have fun compete and win with all the opportunities. We have in the pipeline I think we are at a turning point and I look forward to sharing details as they unfold.

Jonathan Reich: With all the opportunities we have in the pipeline, I think we are at a turning point, and I look forward to sharing details as they unfold. Moving to the Zedge marketplace, our success in growing advertising revenue in recent quarters stems from our continuous optimization efforts combined with highly effective paid UA programs driving positive ROAS in 90 days or less. Additionally, over the past two quarters, we began improving our iOS monetization stack by optimizing ads and rolling out Zedge Plus for iOS, which, along with Paint, contributed to strong iOS revenue growth. Overall, the iOS ecosystem remains a largely untapped opportunity for us, and we continuously look at ways, most recently AI, to unlock it and capitalize on our brand to drive growth. Emojipedia had another good quarter.

Moving to this edge marketplace, our success in growing advertising revenue in recent quarters stems from our continuous optimization efforts combined with highly effective paid UA programs are driving positive ROE oz in 90 days or less additionally over the past two quarters, we began improving.

Our iOS monetization stack by optimizing ads enrolling at the edge plus for iOS, which along with paint contributed to strong iOS revenue growth overall, the iOS ecosystem remains a largely untapped opportunity for us and we continuously look at ways most REIT.

<unk> AI to unlock it and capitalize on our brand to drive growth <unk> had another good quarter, our previous investments in website redesign and localization and technology upgrades continue to pay off and laid the foundation for the next phase of growth with new feature.

Jonathan Reich: Our previous investments in website redesign, localization, and technology upgrades continue to pay off and lay the foundation for the next phase of growth, with new features and content expected to be rolled out in the quarters to come. Taken together, we continue to 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, and our marketing prowess. Data Capabilities, TechStack, and most importantly, our team. Furthermore, we are not just talking about AI.

Yours and content and expect it to be rolled out in the quarters to come.

Taken together, we continue to believe that we have never been in a better position to create sustainable long term profitable growth given the combination of market opportunity.

Our product portfolio and road map, our marketing prowess.

Data capabilities Tech stack and most importantly, our team. Furthermore, we are not just talking about AI, we have already integrated it throughout our business, including product technology and marketing now I would like to turn the call over to E who will review our final.

Yi Tsai: We have already integrated it throughout our business, including product, technology, and marketing. Now, I would like to turn the call over to Yi, who will review our financial results.

<unk> results E.

Yeah.

Thank you Jonathan.

You saw in our earnings release GAAP require us to take a one time $11 9 million non cash write down of <unk> in terms of what I said it is important to underscore that this was a noncash event dictated by timing.

Yi Tsai: Thank you, Jonathan. As you saw in our early release, GAAP required us to take a one-time $11.9 million non-cash write-down of Gurusha's intangible asset. It's important to underscore that this was a non-cash event dictated by timing; current performance did not align with the carrying value on our We still believe that with time, we will unlock growth and achieve the strategic goals that we envisioned when we acquired Grooveshark. Additionally, this write-down does not reflect the valuable gamification experience we secured, benefiting the rest of our business. As a result of the strength related to valuation over the past year, we have added non-GAAP net income and non-GAAP diluted EPS as new metrics that we plan to report going forward. The reconciliation for GAAP to non-GAAP is available in our early release this month. The monthly active users amount for the Zedge marketplace decreased 10.7% from a year ago to 28.8 million. Mao in well-developed markets and emerging markets was down 15.6% and 9.2%, respectively.

That's current performance did not align with our carrying value.

Thanks.

As Jonathan indicated.

We still believe that with time, we will.

Unlock growth and achieve the strategic goals that we envision going really quite crucial.

Additionally, this write down does not reflect the valuable gamification excuse we secure.

Benefiting the rest of our business.

That's a result of the strain related to valuation over the past year. We have added non-GAAP net income and non-GAAP diluted EPS as new metrics that we plan to report going forward.

The reconciliation for GAAP to non-GAAP is available you know, earning release from this morning.

Monthly active users or MAU for the debt market place decreased 10, 7% from a year ago to $28.8 million.

MAU in well developed markets and emerging markets were down 15.6% and 90.2% respective.

Total revenue in the second quarter with $7.8 million.

Yi Tsai: Total revenue in the second quarter was $7.8 million, up 11% from last year. Digital Goods and Services, which encompasses revenue from Georgia, came in at $0.9 million, down 26% from last year, similar to Q1. Khrushchev's learning was again negatively impacted by Apple's ATT framework, macroeconomic issues, and the geopolitical situation.

Up 11% from last year.

Due to their goods and services, which encompasses revenue from Grusha Tam in Europe on $9 million down.

Down 26% from last year.

Similar to Q1.

<unk> revenue was again negatively impacted by Apple's ATP framework.

Macro economic issues and the geopolitical situations.

Subscription revenue for the second quarter was up 24% versus last year.

Recently this matter was up sequentially for the third straight quarter.

That's all net active subscribers trends improve.

Yi Tsai: Subscription revenue for the second quarter was up 24% versus last year. Additionally, this measure was upped sequentially for the third straight quarter, as our net active subscriber trend improves, and higher value iOS subscriptions and our new value-added Zedge Plus offering for Android replace lower cost legacy subscriptions, which only Rimmel has. Freeman's gross transaction value, or GTV, grew 23% from last year to a record $540,000, reflecting higher price per advertising impression and incremental revenue generated from paint, which offset modest decline in other content. I'm out with a record 7.2 cents, up 37% year over year. Reflecting Stability in Ad Pricing and the positive impact of our new iOS and Android Support, cost of revenue declined by 27% and was 5.9% of revenue; hDNA increased by 11% to 6.5 million. Gap loss from operation, including the impact of the $11.9 million write-off, was $11.9 million versus income from operation of $1.5 million last year.

And high on value, our institution and our new value added that's plus offering for Android.

Replaced lower cost legacy subscription.

It's only removed ads.

That's freemen's gross transaction value or G. T V grew 23% from last year to a record $540000.

Reflecting higher price per advertising impression and incremental revenue generated from Kate.

Well, it's offset modest declines in other content sales.

<unk> was a record 7.2 cents up 37% year over year.

Reflecting stability in that pricing and a positive impact of our new ads and enjoys subscription.

Cost of revenue declined by 27% and was 5.9% of revenue.

SG&A increased by 11% to 6.5 million.

GAAP loss from operation, including the impact of the $11 9 million write off was $11 9 million versus income from operation of $1 5 million last year.

GAAP net loss and loss per share for Q2 was $9 2 million and 66 cents versus income and EPS of $1 6 million and 11% respectively in the prior year.

non-GAAP net income and non-GAAP diluted EPS for the quarter were <unk> 5 million and four cents.

Yi Tsai: Gap net loss and loss per share for Q2 were $9.2 million and $0.66 versus income and EPS of $1.6 million and $0.11, respectively, in the prior year. Non-GAAP net income and non-GAAP diluted EPS for the quarter were $0.5 million and $0.04 cents versus $0.8 million and $0.06 cents in the prior year, respectively. Adjusted EBITDA was $1.5 million versus $1.4 million in From a liquidity standpoint, we remain in a strong cash position with over $18.1 million in cash and cash equivalents, and know that we paid down the $2 million in outstanding bank loan during the quarter. Thank you for listening to our second quarter earnings call, and I look forward to speaking with you again on the next call in mid-June. Operator, back to you for Q&A. Certainly, we will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing.

Versus 0.8 million and six cents in the prior year respectively.

Adjusted EBITDA was $1 5 million dollar versus $1.4 million in the prior.

From a liquidity standpoint, we remain in a strong cash position with over $18 million in cash and cash equivalents, knowing that we pay down the $2 million in outstanding in Bangalore.

During the quarter.

Thank you for listening to our second quarter earnings call and I look forward to speaking with you again, although that's call it mid June.

Operator back to you for Q&A.

Certainly we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

You are using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press star queue. At this time, we will pose momentarily to assemble our roster.

Your first question is coming from Allen Klee with Maxim Group. Please pose your question your line is live.

Hi, congratulations on the strong revenue growth. My first question is you had record advertising rates.

Operator: To withdraw your questions, please press star 2. At this time, we will pause momentarily to assemble a roster. Your first question is coming from Alan Klee with the Maxim Group. Please pose your question. Your line is live.

But it's also your seasonally strongest quarter I think so when we parse out the how to think about maybe.

To some degree what effect is seasonal versus the other stuff.

Hi, Alan Thanks, so much for.

Your comments are and as I mentioned in my earlier.

A summary of the quarter.

We're actually seeing that our.

Allen Robert Klee: Hi. Congratulations on the strong revenue growth. My first question is, you had record advertising rates. But it's also your seasonally strongest quarter, I think. So when we parse out how to think about, to some degree, what the effect is seasonal versus other stuff.

Halfway through the quarter numbers are holding up so.

That is due to a combination of factors.

Oh.

Feature wise.

AD Tech wise, where AD stack wise as.

As well as I guess some secular features are some secular factors. So it's a little bit hard to sort of parse that out because by contrast, typically our Q3 is a <unk>.

Jonathan Reich: Thanks so much for your comments. And as I mentioned in my earlier summary of the quarter, we're actually seeing that our numbers, halfway through the quarter, are holding up. So that is due to a combination of factors. Oh, feature-wise, at TechWise or at StackWise as well as, I guess, you know, some secular features or some secular factors. So it's a little bit hard to sort of parse that out because, by contrast, typically, our Q3 is our weakest quarter from an ad revenue perspective in light of the post-season drop-off and add budgets and so on and so forth. That's great.

Our weakest quarter from an AD revenue perspective in light of.

Post season drop off in AD budgets, and so on and so forth.

That's great. Thank you and then just.

In terms of the marketplace.

I think you said bad paint and there's greater functionality on the web.

Yeah.

Gross transactional value.

Gold was up like 23%.

Is.

Is there a way to think about what what the key drivers are.

Our growth in marketplace and things that youre doing to keep this going.

Sure just to be more specific are you talking about the premium or are you talking about the overall marketplace, which includes.

Not only licensed content, but also user generated content.

Jonathan Reich: Thank you. And then just, in terms of the marketplace, I think you said that paint and there's greater functionality on the web, and Gross Transactional Value sold was up like 23%. Yeah. Is there a way to think about what the key drivers are of growth and the marketplace and things that Sure. Just to be more specific, are you talking about Zedge Premium or are you talking about the overall marketplace, which includes not only licensed content but also user-generated content for both? Well, when you take a look at Zedge Premium, which is the licensed content area, we, you know, continue to iterate, tune, optimize, and as a result, you're seeing improvements there. We are also now beginning to think about, What can Zedge Premium look like with the expansion across the web?

Oh for bolt.

Well wait when you take a look at a nice premium which as you know.

Our license content area, we continue to iterate to optimize.

And as a result.

Youre seeing the improvements there.

We are also now beginning to think about.

Yeah.

What can that market, what can that premium look like with the extraction.

Cross web.

And in terms of the.

Overall, the <unk> App, our global edge marketplace, it's a function of continually adding.

And optimizing features that we have as well as improving.

The user experience there is work that can be done on the user experience one of the areas that we are beginning to look into now relates to onboarding.

Jonathan Reich: and in terms of the overall Zedge app or, you know, the global Zedge marketplace, it's a function of continually adding and optimizing features that we have, as well as improving the user experience. There's work that can be done on the user experience. One of the areas that we're beginning to look into now relates to onboarding in the past. We've talked about recommendations and the content that is served up to users. How does that impact the user experience? And then projects around improving engagement and retention?

In the past, we've talked about our recommendations and the content that served up to users how does that impact.

The user experience.

And then projects around improving engagement and retention so in.

The totality.

Each of those contributes to the.

The results that we reported today.

And then separate and apart from that as I mentioned.

The work that we've done last year in terms of overhauling.

Jonathan Reich: So in totality, each of those contributes to the results that we reported today. And then, separate and apart from that, as I mentioned, the work that we did last year in terms of overhauling the Zedge Plus subscription on Android and rolling out Zedge Plus subscription on iOS for the first time has also yielded very positive results. Okay, um, when I look at- Yes, thank you, so we understand it, there's Zedge plus. A marketplace subscription. Can you also get another different type of subscription just for being ad-free, or are they the same?

The.

Z plus subscription on Android and rolling out.

Z plus subscription on iOS for the first time has also yielded.

Very positive results for us.

Okay does that nine months your question is yes.

Yes. Thank you.

Just so we understand it theres zich plus is.

As the <unk> marketplace subscription and you also get another some different type of subscription just for being add Laurie.

Or are they the same and then your paid subscribers were flat sequentially do you think that that number can continue to grow sequentially. Thank you.

So that plus is our subscription offering our subscription offering has.

Jonathan Reich: And then your paid subscribers were flat sequentially. Do you think that's true? that number can continue to grow. So ZedgePlus is our subscription offering. Our subscription offering has bundles together several value-adds. One of those value adds is ad free, as you described it, but then there are additional value adds in there, whether it be bolts that can be used for creating AI images, as an example. And insofar as potential growth of the number of subscribers, our aspiration is clearly to see to it that that subscription number grows over time, and there is ongoing work with respect to how to make that subscription offering, whether it be on Android or on iOS, even more attractive. If I were to, provide a metaphor, When you think about, you know, Amazon, so Amazon has overnight delivery, but they also offer a wealth of other value added services, whether it be content, whether it be storage, and so on and so forth.

Bundled together several value adds.

One of those value add is.

AD free as you described it but then there.

There are additional value.

Value adds in there whether it would be.

Well that can be used for creating AI images.

As an example.

And insofar as potential.

Potential growth of number of subscribers.

Our aspiration is clearly to see to it that that subscription number grows over time.

And there is ongoing.

Work.

With respect to how to make that subscription offering whether it be on and provide or on iOS, even more attractive.

If I were to.

Provide a metaphor.

When you think about.

Amazon So Amazon has overnight delivery, but they also offer a wealth of other value adds whether it be content, whether it be storage and so on and so forth.

Jonathan Reich: And as I said, as a metaphor, that is the work that we are heavily invested in terms of seeing to it that we can continue to make the subscription offering even more attractive than what exists today.

And as I said as a metaphor that is the.

Work that we are.

Heavily invested in terms of seeing to it that we can continue to make the subscription offering.

Even more attractive.

Then what exists today and going back to the overhaul that we have introduced.

Jonathan Reich: And going back to the overhaul that we introduced, in 2023, that was an improvement in terms of those value adds, making that subscription offering more attractive and ultimately bringing in new subscribers. Thank you. In terms of Emojipedia, I don't know if you've provided any numbers in terms of how it grew over a year, or over a year and a half, or a year and a half?

In 2023 that was a.

The improvement in terms of those value adds making that subscription offering.

More attractive.

And ultimately <unk>.

<unk> new subscribers.

Thank you in terms of ammonia P D a.

I don't know if you provided any numbers in terms of did it grow over year over year are the results.

I'm not sure if you're able to provide revenue.

So you said the new actions you'd like to add you mentioned, some things like emoji mashups and motive bonds.

Jonathan Reich: I'm not sure if you're able to provide revenue, but you said there were new actions you'd like to add. You mentioned some things like emoji mashups, emoticons, and singer on K-Emojis. Could you just tell me what mash-ups and KOMs... Sure.

I'm, probably saying the wrong Kao emojis could you just tell me, what mash ups and Kayo monkey.

Oh sure. So these are new content just to.

Keep it.

Simple these are new content forms.

Jonathan Reich: So these are new content forms, but by way of example, when today one renders a smiley emoji, they can either have a smiley face in yellow and so on and so forth, or they can type a colon and a closed parenthesis.

But by way of example.

Oh.

When today one.

Renders a smiling emoji.

They can either have a smiley face.

In yellow and so on and so forth or are they can type a colon and a close branches.

That that is a contrast with the text string is this to note.

Jonathan Reich: That is a contrast. So there are the text strings that connote various messages. And that is a potential direction for us to add as a new content vertical within Emojipedia. And that's one of many. In terms of numbers, I'm going to hand off to Yi to answer your question. Hi Alan.

Various <unk>.

Massachusetts and that is a temporal direction for us to add as a new content vertical went.

And then a motor PDR and that's one of many in terms of numbers I'm going to hand off to.

To answer your question.

Hi, Alan so email zucchini, a the second quarter core whats not as great. As we had hoped for but if you look at the six months, we still grew the 27%.

Yi Tsai: So in Wikipedia, the second quarter was not as great as we had hoped for. But if you look at the six months, it still grew by 27% for three months, and in January, we only grew by about April. Thank you, and then one of the areas that you mentioned as a priority. Monthly, trying to grow monthly active users. It was up slightly, which is encouraging. Could you maybe just highlight some of the key things you're focused on? get that number just to start growing.

For three months ended January we only grew about 8%.

Thank you and then one of the areas that I.

I think you mentioned as a priority as well.

Monthly trying to.

ROE of monthly active users up slightly sequentially, which which is encouraging.

Maybe just highlight some of the key things you're focused on to.

I get that number just to start growing again.

Sure. So we have a couple of activities that are.

Taking place.

We put together.

What I'll call a task force of.

Our rank and file zircon points.

Jonathan Reich: Sure, so we have a couple of activities that are taking place. We put together what I'll call a task force of rank-and-file Zedge employees without management participation that is working on various feature enhancements, new features, and potentially complementary products that would unlock growth. And then separately, we are also looking at ways of reimagining the Zedge app or benefiting from the install base that we have to help fuel additional growth, whether that be through product marketing, intensive plans, influencer-type and Referral Plans, and then, of course, separate and apart from that, user acquisition investment. And all of those taken together, we, you know, are hoping that we can reverse that trend and see to it that we unlock what we believe Alan, I would just like to add something.

Without it.

Management participation.

That.

Are working on.

Yes.

Feature enhancements new features.

And potentially complementary.

<unk>.

That would.

Unlock growth.

Then separately.

We are also looking at.

Waves of re imagining.

Theres edge app or.

Benefiting from the installed base that we have.

To help fuel additional growth whether that be through product marketing incentive plans.

Influencer.

Type of.

Or and referral plans.

And then of course separate and apart from that.

User acquisition.

Investments.

And all of those taken together we.

Are hoping that we can.

Reverse that trend and see what we unlock what we believe to be a.

Yi Tsai: Sorry, I would just like to add, as we mentioned, even though our active subscribers stay flat at 648,000, but we are replacing lower-value subscriptions with a higher value from the lifetime subscription as well as the IOS subscription. So, although the active subscribers remain the same, our revenue base is much higher. Thank you, Yi.

A promising growth opportunity.

Alan.

Like to add.

I'm, sorry, I will just like we are as we mentioned, even though Apple plus.

Well Bruce stay flat.

48000.

Glazing.

Lower value subscription with a higher value.

From a lifetime subscription in that as well.

Allen Robert Klee: Yeah, that's a good point. Thank you. Then on guru shots, a couple of questions. My personal experience, and I'm a fan.

With them.

So although the active subscriber will remain the same but our revenue base.

Much higher.

Allen Robert Klee: Shampold not being that savvy in this stuff, but it's hard to be a newbie when you first get on it and know how to engage and tells you, you know, you can't do a bunch of things until you get to a certain level. So maybe what you're doing to change that and then talk a little bit about what the Turbo Feature is, what that actually is, and the new feature you're going to add, and then why multiple should help. Thanks.

Thank you Lee.

Yeah. That's a good point. Thank you and then on Peru shots a couple of questions.

My personal experience and I'm, a bad example, not being.

That savi in this stuff but.

It's hard to be a newbie.

Your first get on it seems difficult to.

How do we engage to and you know and it tells you you know you can.

Gauge and a bunch of things until you get to a certain level. So maybe what you're doing to change that and then also.

Talk a little about what the.

Turbo feature what that actually is in the new feature Youre going to add and then why multiple virtual currencies.

That should help you out.

<unk>.

Thank you Alan and.

Point, very well taken with respect to Onboarding.

Jonathan Reich: Thank you, Alan, and point very well taken with respect to onboarding. As you said, a newbie that downloads guru shots today is immediately immersed in the full game. As they enter into a competition, they can be competing against up to 7,000 other photographers that are in that competition with a dashboard that has a lot of numbers and features to it. So a user has to be exceptionally loyal, uh, and, and, uh, very, very insistent on saying they're going to figure this thing out.

As you had said a newbie to downloads grew shops today.

Is.

Immediately.

Immersed in the full game.

Enter into a competition they can be competing against up to 7000.

Other photographers that are in that.

Competition.

With a dashboard that has a lot of.

Numbers.

<unk> features to it.

So a user has to be exceptionally.

Okay.

Loyal and.

Very very insistent, Bob, saying, they're going to figure this thing out.

Jonathan Reich: Overhauling onboarding will allow for us to simplify the gameplay such that we get users into that funnel immediately, which opens up the top of the funnel, hopefully expanding the potential player base, and also allows for folks that may think that they are not good photographers to make this accessible. And then, with progression, as users begin to master skills and so on and so forth, they will then gain exposure to additional features that contribute to making the gameplay more competitive and fun, and so on and so forth. In addition to that, the onboarding will have an element to it that makes the game more or, I guess, shorter in duration. So a typical photo challenge today in guru shots can range in duration from one to several days. The notion of going through that onboarding process will be to decrease that to, you know, it could be 30 minutes, it could be an hour, it could be two hours, and so on and so forth. With respect to changing the economy, the economy today is a rigid one.

Overhauling onboarding.

Will allow for us to.

Simplify the game plan.

That we get users into that funnel immediately.

Which.

Opens up the top of the funnel hopefully band for plate.

The potential player base.

And also allows for folks that may think that.

They are not.

Good photographers, making this accessible to them.

And then with progression.

As users begin to master skills.

And so on and so forth. They will then get gain exposure to additional features.

That contribute to making the game play and more competitive in Bonn.

And so on and so forth.

In addition to that.

The onboarding well.

Have an element to it that <unk>.

Makes the game more or I guess.

Yeah.

Shorter in duration. So a typical photo challenge today in Guru shops can range in duration from one to several days.

Ocean of going through that Onboarding future will be to decrease that too.

It could be 30 minutes it could be an hour it could be two hours and so on and so forth.

With respect to <unk>.

Changing the economy. The economy today is a Richard economy, there are three game resources.

Jonathan Reich: There are three game resources that users can benefit from while playing the game, and the way to access those game resources is through a hard in-app purchase event. If you buy resource A, it does not have any relevance to resource B or C. To master the game, you really need to have a portfolio of those three resources, and migrating to a coin-based economy, which has multiple currencies, allows for a lot more flexibility. And it also allows for us to reward every player in the game. Meaning, if you are playing the game today and you don't come in first, second, or third place, that means you don't feel that great about yourself.

That users.

Can benefit from.

While playing the game.

And.

The way to access those game resources is through a hard in App purchase event, if you buy resource a.

It does not have any relevance to resource BRC.

To master the game, you really need to have a portfolio of those three resources.

And.

Migrating to a coin based.

Our economy, which has multiple currencies.

Allows for a lot more flexibility.

And it also allows for us to.

Reward every player in the game.

Meaning if you are playing the game today and you don't come in first second or third place that means you are.

Don't feel that great about yourself, even though you may have come in fourth which is.

Jonathan Reich: Even though you may have come in fourth, which is 6,996 in terms of your ranking, our ability will be with this new coin-based economy to see to it that every player, even the player that ranks lowest of those 7,000, will be able to get a reward and ultimately use that reward in one way, shape, form, or another, or use those rewards in order to potentially gain an edge with respect to game resources. As I mentioned during my comments, we've made changes to the product team. And the product team is now very, very well resourced, with a community of product managers coming out of some of the most well-known global gaming companies that have experience not only in gaming, design, user experience, user interface, but also in gaming economies and what can be done in order to optimize those economies, ultimately leading to better revenue generation, as well as contributing to improving user engagement and user retention.

6996 in terms of your ranking.

Our ability will be with this new.

Coin based economy to see to it that every player even a player that ranks lowest.

Of those 7000.

We'll be able to get a reward.

And ultimately use that reward in one way shape form or another or use those rewards in order to potentially.

<unk>.

Gain an edge with respect the game resources.

<unk>.

As I mentioned during my comments.

We've made changes to the product team.

And.

The <unk>.

Product team is now very very well resource.

With.

Yes.

A community.

Product managers to come out of some of the most well.

Well known global gaming companies that have experienced not only in gaming and design and user experience.

Our interface, but also in gaming economies and what can be done in order to optimize those economies ultimately leading to.

Better revenue generation.

As well as contributing to improve.

Improving user engagement and <unk>.

User retention.

Jonathan Reich: In totality, our hope and expectation is that, taken together, these will unlock the growth that we believe is inherent in this asset, in terms of the new features. The new features, the most immediate ones are around offering what I will call mini-game battles for users that are already in the middle of the game and then and now beginning to expand that to just being a standalone short-term, limited number of competitors type of battle. Again, allowing for this to be a quick win for users to get that dopamine flow and feel like, wow, they're competing in real time without having to wait for an extended period of time in order to ultimately win a battle, and, in addition to that, also decreasing the number of people that they're competing against, therefore increasing the chances that they can actually win and gain that accolade accordingly.

In totality, our hope and expectation is that.

Taken together that will unlock the growth that we believe is inherent in this asset.

In terms of.

The new features the new features most immediately are around offering what I will call. Many.

Gain battles.

For users that are already in the middle of the game and then and now beginning to expand that to Jeff.

Being a standalone short term limited number of competitors type of battle.

Again, allowing for this to be.

A quick win for users.

To get that dopamine flow and feel like Wow, they're competing in real time without having to wait for an extended period of time in order to ultimately.

When a battle.

And in addition to that also decreasing the number of people that they are competing against.

Therefore, increasing the chances that they can actually win and.

Gain that accolade accordingly.

Jonathan Reich: Does that answer your question? That was very thorough. Thank you. Some updates. AI, Art Master. Provide an update. Sure. So AI Art Master remains in soft launch. We made the decision to keep it in soft launch while we are hard at work at unlocking the growth in the core guru shots game, and we continue to gather data.

Does that answer your question.

That was very thorough thank you.

<unk>.

Just some updates.

AI Art Master can you provide an update on that.

Sure, So hey, art Master remains in soft launch.

When we made the decision to keep it in soft launch while we are hard at work.

At unlocking the growth in the core Guru shocks game.

And we continue to gather data.

Jonathan Reich: Our plan currently is that when we get to Gurusha's trajectory and the direction that we believe will allow for this growth, we will then refocus efforts and resources on AI-ArtMath. We just don't want to spread ourselves so thinly that we're not progressing with the Guru Shots game and that, you know, as we evolve, it will take time to launch this AI Art Master game as we iterate and so on and so forth. So, focusing on getting one thing done really, really well and then progressing to the next thing, which would be AI Art Master. AI Art Master is now at a point where we are able to monitor the data. That data is going to be exceptionally valuable in terms of helping guide what our future direction is with that game and how it evolves. Okay, and then I'm guessing a similar answer to the past call. You talked about potentially launching. Hybrid Casual Game, is that kind of in the same stack? AI Art Master is in that hybrid casual category.

Our plan currently is that when we get through grew shops trajectory in their direction.

That.

We believe will allow for this growth that we will then refocus efforts and resources on AAR Master.

We just don't want to spread ourselves.

<unk> family that we're not progressing.

The Guru shots game.

And that as we are.

Evolve it will take time to watch this.

Art Master game.

As we iterate and so on and so forth so focusing on getting one thing done really really well.

Then progressing to the next thing, which would be master Master now is at a point where.

We are able to monitor the data that data is going to be exceptionally valuable in terms of helping.

<unk>, what our future direction is.

With that game and how it evolves.

Gotcha.

Okay, and then probably im guessing a similar answer to answer them.

On the past call you talked about potentially launching a hybrid casual game is that kind of in the same status there.

AI arent master is in that hybrid casual category those those are not separate and distinct from one another.

Jonathan Reich: Those are not separate and distinct from one another, um, OK, and then there is a question on financials. Jump into SG&A for the quarter is the way to look at that. To what degree do we think of that as like? kind of like this is a seasonally strong quarter versus some of the other things you've talked about, perhaps paid acquisition or some of that as well as, and you've brought on some more people, so I'm trying to get a sense of how much of it is seasonal versus kind of new. Sure, I would actually reframe that a little bit.

Okay got it thank you.

<unk>.

Okay and then.

Question on financials.

Jumping to SG&A.

For the quarter is the way to look at that.

To what degree do we think of that as like.

But this is a seasonally strong quarter versus some of the other things you've talked about them.

Perhaps paid acquisition or some of the new.

S G.

And you brought on some more people so I'm trying to get a sense of how much of it is maybe seasonal versus kind of a new run rate for SG&A. Thank you sure I would actually reframe that a little bit.

SG&A includes marketing and it.

Jonathan Reich: SG&A includes marketing in it, so there are two components of that number. One is the actual money that we have spent on paid user acquisition. And as I said in the past, when looking at budgets, there's going to be the steady state of this platform, this particular campaign works, we continue investing in it, but there is obviously a ceiling there. And then there is what we'll call test budgets, where you try a new platform, you try new creatives, and stuff like that. And some of that stuff works; some of that does not.

So there are.

Two components.

<unk>.

That number one is actual money that we have spent on paid user acquisition.

And as I've said in the past.

In order to scale paid user acquisition.

When looking at budgets theres going to be the steady state Oh. This platform. This particular campaign.

Works, we continue investing in it but there is obviously a ceiling there and then there is what we'll call test budgets, where you're trying new platform you try new creators and stuff like that.

And some of that stuff worked some of that does not.

Jonathan Reich: So you need both components in order to scale paid user acquisition. Apple or Google when we bring on a subscriber or when a user makes an in-app purchase. So those two components taken together contributed materially to the increase in sGNA. And the way I sort of look at it is, if we're successful in growing our subscriber base, if we're successful in generating more in-app purchases, SG&A goes up. That's actually a good reason for SG&A to go up as opposed to not managing our expense for infrastructure properly by way of contrast. Yi, do you have anything that you want to add to that?

You need both components in order to scale paid user acquisition.

Then.

There is also the fee that we pay to whether it would be.

Apple or.

Google when we bring on a subscriber or when a user makes an in app purchase.

So those two components taken together contributed materially to the increase in SG&A.

And the way I sort of look at it is.

If we're successful in growing our subscriber base if were successful in generating more in app purchases.

SG&A goes up that's actually a good reason for SG&A to go up as opposed to <unk>.

Managing our expense.

For infrastructure properly.

By way of contrast.

Do you have anything that you want to add to that.

Yi Tsai: Yeah, I'll only add that our FTE remains quite stable, and our net compensation expenditure is actually in line with last year. So all the increase in SG&A, Jonathan mentioned, was in the marketing spend and also the platform fee. One of the downsides when you bring out a lifetime subscription. From Google Play's point of view, this is one and done, so they treat it as a... in their purchase. So we pay a 30% fee rather than a regular submission, which is at a 15% fee.

Yes.

Alan.

FTE remained quite stable and all.

Net compensation expense of Italy in line with last year.

So all the increase in SG&A, Jonathan mentioned was in the.

Marketing spend and also the pipeline.

One of the downside that we brought a lifetime Cisco was from.

From Google play's point of view it as one and done so they traded at.

In the <unk>, just so we pay a 30% fee rather than a ridiculous appreciable which is <unk>.

8% Steve.

Yi Tsai: So as a result, our platform went up by virtual, you know, our rolling out of a lifetime subscription. Great. Okay, congrats again. Thank you. Thank you. This does conclude our question and answer session and the conference call. Thank you for attending today's presentation. You may now go.

So as a result.

<unk> went up by virtue of our rolling out a lifetime subscription.

Zero.

Great. Okay. Congrats again, thank you so much.

Thank you.

Yeah.

This does conclude our question and answer session and the conference call. Thank you for attending today's presentation. You may now disconnect.

Okay.