Q3 2025 Zedge Inc Earnings Call
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Brian: Now I'll turn the call over to Brian to go.
Brian: Thank you operator during todays call Jonathan Reich <unk> Chief.
Brian: Chief Executive Officer, and East side, They're just chief financial Officer will discuss the financial.
Speaker Change: Financial and operational results that were reported today.
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Brian: 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 could differ materially from those discussed on today's calls. These risks and uncertainties include but are not limited to specific risks and uncertainties disclosed in.
Perfect.
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Brian: That's just periodic SEC filings.
Please continue to hold ladies and gentlemen, your conference will begin momentarily. Please continue to hold.
Brian: <unk> 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.
Speaker Change: Good morning.
Okay.
Please note that our earnings release is available on the Investor Relations page of its edge website and has also been filed on form 8-K with the SEC.
Okay.
Okay.
Brian: Finally on this call we will use non-GAAP measures. Examples include non-GAAP EPS non-GAAP net income and adjusted EBITDA. Please see our earnings release for an explanation of our use of these non-GAAP measures now I would like to turn the call over to Jonathan.
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Jonathan: Thank you Brian Good afternoon, everyone and thank you for joining us today to discuss <unk> third quarter fiscal 'twenty twenty-five results.
Speaker Change: Q3 marked a return to revenue growth for us edge, highlighting the resilience of our business. Despite an AD market that saw some disruption due to tick tox absence from the U S until mid February along with tariff related uncertainty that caused macroeconomic volatility and expected softness.
Speaker Change: Good day and welcome to the <unk> earnings Conference call for the third quarter of fiscal 2025 results. During management's prepared remarks, all participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation by such as 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 two.
Jonathan: At Guru shots, where we scaled back user acquisition to focus on what Guru shots to Dot O will become.
Jonathan: The $4 million in annualized gross cost savings from our global restructuring and other cost reduction items also began to materialize during the quarter.
Brian Cingal: Now I'll turn the call over to Brian Cingal.
Thank you operator during todays call Jonathan Reich.
Speaker Change: <unk>, Chief Executive Officer, and ESI, <unk>, Chief Financial Officer will discuss <unk> financial and operational results that were reported today.
Jonathan: <unk> of our operations in Norway, the streamlining of the Guru shots team and the associated decrease in discretionary spend especially in lowering guru shots as marketing investment helped to return us to profitability on a GAAP basis and boosted our profitability on a non-GAAP basis.
Speaker Change: 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 could differ materially from those discussed on today's call. These risks and uncertainties include but are not limited to specific risks and uncertainties disclosed.
Jonathan: Furthermore, adjusted EBITDA increased 46% year over year, and we generated <unk> 8 million in free cash flow, notably free cash flow includes approximately $1 million for certain payments made during the quarter, primarily severance related to our restructure.
Speaker Change: That's just periodic SEC filings.
Speaker Change: <unk> 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.
Jonathan: <unk> and a portion of the final installment of the retention bonus stemming from the 2022 Guru shots acquisition in.
Speaker Change: Please note that our earnings release is available on the Investor Relations page of its edge website has also been filed on form 8-K with the SEC.
Speaker Change: Finally on this call we will use non-GAAP measures. Examples include non-GAAP EPS non-GAAP net income and adjusted EBITDA. Please see our earnings release for an explanation of our use of these non-GAAP measures now I would like to turn the call over to Jonathan.
Jonathan: In Q4, the benefits to free cash flow should further improve as we anticipate a total of about $600000 in restructuring related severance and the final payout of the Guru shots retention pool, we expect to complete restructuring related cash severance payments in the first half.
Speaker Change: Thank you Brian Good afternoon, everyone and thank you for joining us today to discuss <unk> third quarter fiscal 2025 results.
As of fiscal year, 2026, totaling approximately $200000 our balance sheet remains strong we ended the quarter with $24 million in cash and no debt, even after repurchasing 219000 shares under our previously announced $5 million buyback.
Speaker Change: Q3 marked a return to revenue growth for us edge, highlighting the resilience of our business. Despite an AD market that saw some disruption due to take talks absence from the U S until mid February along with tariff related uncertainty that caused macroeconomic volatility and expected softness.
Authorization.
Brian: Key business highlights for the quarter included we grew this edge plus subscriber base to an all time high of nearly 900000% to 37% year over year increase <unk> plus subscription revenue grew 13% year over year, while deferred revenue primarily representing future.
Speaker Change: At Guru shots, where we scaled back user acquisition to focus on what Guru shots to Dot O will become.
Speaker Change: The $4 million in annualized gross cost savings from our global restructuring and other cost reduction items also began to materialize during the quarter.
Brian: <unk> recurring subscription revenue reached $5 million up 83% year over year, and 13% sequentially and <unk> premium revenue more than doubled driven by expanding the offering to our web users increased usage of our paint AI image generator and the ongoing demand.
Speaker Change: <unk> of our operations in Norway, the streamlining of the Guru shots team and the associated decrease in discretionary spend especially in lowering guru shots as marketing investment helped return us to profitability on a GAAP basis and boosted our profitability on a non-GAAP basis.
Brian: For three D parallax wallpapers.
Brian: Monthly active users or <unk> declined year over year. The narrative is more nuanced for a while now we are focused on attracting and retaining higher lifetime value or LTV users, which are reported as miu in well developed markets in the supplemental tables of our earnings.
Speaker Change: Furthermore, adjusted EBITDA increased 46% year over year, and we generated zero point $8 million in free cash flow, notably free cash flow includes approximately $1 million for certain payments made during the quarter, primarily severance related to our restructure.
Brian: Release, the overall decrease was the outcome of a mix shift away from lower LTV users globally to higher LTV users in well developed markets. These efforts to focus on higher LTV users, who are more likely to subscribe make purchases and engage more often and more deeply.
Speaker Change: <unk> and a portion of the final installment of the retention bonus stemming from the 2022 Guru shots acquisition in.
Speaker Change: In Q4, the benefits to free cash flow should further improve as we anticipate a total of about $600000 in restructuring related severance and the final payout of the Guru shots retention pool, we expect to complete restructuring related cash severance payments in the first half.
Brian: With our content and features are bearing fruit and thus we continue to focus on attracting and retaining this part of our base. Additionally, our focused investment in paid user acquisition plays an important role in this success across both Android and iOS and the positive trends are clearly.
Speaker Change: <unk> of fiscal year 2026, totaling approximately $200000 our balance sheet remains strong we ended the quarter with $24 million in cash and no debt, even after repurchasing 219000 shares under our previously announced $5 million buyback.
Brian: <unk> in our key performance metrics average revenue per monthly active user increased by 33% year over year, indicating that we're monetizing each user more efficiently deferred subscription revenue continued to climb with lifetime plans, capturing a larger part of the overall mix.
Speaker Change: Authorization.
Speaker Change: Key business highlights for the quarter included we grew this edge plus subscriber base to an all time high of nearly 900000% to 37% year over year increase as edge plus subscription revenue grew 13% year over year, while deferred revenue primarily representing fewer.
Brian: For lifetime plans the user prepays, the full amount at purchase requiring us to pay the entire App store fee upfront. This allows us to recognize 100% gross margins on the deferred revenue as it is recognized monthly over the subsequent 30 months and critically key user metrics.
Speaker Change: <unk> recurring subscription revenue reached $5 million up 83% year over year, and 13% sequentially and <unk> premium revenue more than doubled driven by expanding the offering to our web users increased usage of our paint AI image generator and ongoing demand.
Brian: Within well developed economies have started to stabilize hopefully positioning us for a return to growth in the future and reinforcing that the product and monetization strategies, we have implemented resonate where they matter most.
Speaker Change: For three D parallax wallpapers.
Speaker Change: Monthly active users or <unk> declined year over year. The narrative is more nuanced for a while now we are focused on attracting and retaining higher lifetime value or LTV users, which are reported as miu in well developed markets in the supplemental tables of our earnings.
Brian: Stabilization remains a focus but not at any cost our priority is to grow our customer base of high LTV users, who engage with our product regularly and we're confident that our performance marketing efforts and product roadmap are assisting us in achieving these goals looking ahead in.
Speaker Change: Release, the overall decrease was the outcome of a mix shift away from lower LTV users globally to higher LTV users in well developed markets. These efforts to focus on higher LTV users, who are more likely to subscribe make purchases and engage more often and more deeply.
Brian: <unk> across our platform remains key to driving growth, we recently announced the launch of data see its dot AI, a b to b content marketplace that focuses on supplying enterprise customers in need of both on demand and off the shelf datasets initially focused on images and <unk>.
Speaker Change: With our content and features are bearing fruit and thus we continue to focus on attracting and retaining this part of our base. Additionally, our focused investment in paid user acquisition plays an important role in this success across both Android and iOS and the positive trends are clearly.
Brian: <unk> with detailed meta data for AI training.
Brian: <unk> Dot AI leverages, our growing content library of over $30 million rights cleared images are prolific community of photographers and graphic designers and our existing marketplace infrastructure and Knowhow. We aim to become the go to source for pre training and fine tuning AI datasets meeting the knee.
Speaker Change: <unk> in our key performance metrics average revenue per monthly active user increased by 33% year over year, indicating that we're monetizing each user more efficiently deferred subscription revenue continued to climb with lifetime plans, capturing a larger part of the overall mix.
Brian: A foundational model developers for high quality authentic and diverse Reits cleared content at scale last week, we signed our first agreement with a leading global AI technology company validating both the market opportunity and the value of what we have to offer this initiative opens up in ne.
Speaker Change: For lifetime plans the user prepays, the full amount at purchase requiring us to pay the entire App store fee upfront. This allows us to recognize 100% gross margins on the deferred revenue as it is recognized monthly over the subsequent 30 months and critically key user metrics.
Brian: Since new revenue source with the potential for not only reoccurring revenue, but also potential recurring revenue streams for us while also providing our creators with more ways to monetize their work.
Brian: Looking ahead, we are exploring opportunities to expand our offerings beyond images and provide additional mediums, including video and audio as well as other commercially viable data types. We believe that this seminal business expansion supports our conviction that investing in and nurturing our vibrant.
Speaker Change: Within well developed economies have started to stabilize hopefully positioning us for a return to growth in the future and reinforcing that the product and monetization strategies, we have implemented resonate where they matter most.
Speaker Change: Stabilization remains a focus but not at any cost our priority is to grow our customer base of high LTV users, who engage with our product regularly and we're confident that our performance marketing efforts and product roadmap are assisting us in achieving these goals looking ahead in.
The artist community is a critical differentiator that will enable us to scale up quickly. We are also about to rollout an AI audio generator as part of paint our Gen. AI creation suite that allows users to harness the power of AI to generate custom ringtones and notifications sounds with simple.
Speaker Change: <unk> across our platform remains key to driving growth.
Brian: Text prompts this is a major milestone in our AI roadmap positioning us as one of the first consumer platforms to enable user generated audio content at scale. It also solidifies our leadership in mobile personalization.
Speaker Change: We recently announced the launch of data <unk> Dot AI, a b to b content marketplace that focuses on supplying enterprise customers in need of both on demand and off the shelf datasets initially focused on images enriched with detailed meta data for AI training.
Brian: <unk> remained stable during the quarter and continues to evolve with the expected release of digital stickers, a new vertical on World Emoji day, which is celebrated in July. We're also inching toward the introduction of a full site redesign to improve user experience and engagement as discussed last.
Speaker Change: <unk> Dot AI leverages, our growing content library of over $30 million rights cleared images are prolific community of photographers and graphic designers and our existing marketplace infrastructure and Knowhow. We aim to become the go to source for pre training and fine tuning AI datasets meeting the need.
Brian: Last quarter, we are ideating about what guru shots to Dot O can and will be part of the undertaking revolves around the core game, including Onboarding progression devoting mechanic and reward dynamics at the same time. We are also thinking about how to better meet the needs that we envision are critical.
Speaker Change: A foundational model developers for high quality authentic and diverse Reits cleared content at scale.
Speaker Change: Last week, we signed our first agreement with a leading global AI technology company validating both the market opportunity and the value of what we have to offer. This initiative opens up in nascent new revenue source with the potential for not only reoccurring revenue, but also potential recurring revenue streams for us.
Brian: For data seeds dot AI to scale effectively as expected <unk> revenue declined year over year, primarily due to our decision to materially decrease our paid user acquisition spend Fortunately the investments we have made are yielding customers with attractive <unk> profiles.
Speaker Change: While also providing our creators with more ways to monetize their work.
Speaker Change: Looking ahead, we are exploring opportunities to expand our offerings beyond images and provide additional mediums, including video and audio as well as other commercially viable data types. We believe that this seminal business expansion supports our conviction that investing in and nurturing our vibrant.
Brian: But we want to keep much of our powder dry until we are ready for prime time with Guru shots to data across the company. We've identified five core strategic priorities for the remainder of the calendar year.
Brian: AI innovation, mainly expanding the rollout of tools like our AI audio generator and embedding AI across all departments in the company, including design engineering quality assurance marketing monetization and finance.
Speaker Change: The artist community is a critical differentiator that will enable us to scale up quickly. We are also about to rollout an AI audio generator as part of paint our Gen. AI creation suite that allows users to harness the power of AI to generate custom ringtones and notifications sounds with simple.
Brian: <unk> community empowerment by strengthening our creator community with opportunities to make money gain recognition and improve their skill base.
Speaker Change: Text prompts this is a major milestone in our AI roadmap positioning us as one of the first consumer platforms to enable user generated audio content at scale. It also solidifies our leadership in mobile personalization.
Brian: User and subscription growth with a particular focus on high value users Guru shots to dot O that is imagining what the next generation of Guru shops can be in order to drive standalone growth in concert with meeting the needs of data seeds Dot AI and finally.
Speaker Change: <unk> remained stable during the quarter and continues to evolve with the expected release of digital stickers, a new vertical on World Emoji day, which is celebrated in July. We're also entering toward the introduction of a full site redesign to improve user experience and engagement as discussed last.
Brian: <unk> expansion scaling data seeds dot AI and exploring new enterprise content licensing opportunities.
We believe the structural improvements we've made we will continue to become evident in Q4 fiscal year 'twenty five and be fully visible as we move into fiscal 'twenty six.
Speaker Change: Last quarter, we are ideating about what guru shots to Dot O can and will be part of the undertaking revolves around the core game, including Onboarding progression devoting mechanic and reward dynamics at the same time. We are also thinking about how to better meet the needs that we envision are critical.
Brian: When combined with continued product innovation and strategic discipline, we are positioned well to deliver sustained growth higher margins and long term value creation for shareholders.
Speaker Change: I would now like to call on <unk> to provide insights into our financial performance.
Speaker Change: For <unk> dot AI to scale effectively as expected Guru shots as revenue declined year over year, primarily due to our decision to materially decrease our paid user acquisition spend Fortunately the investments we have made are yielding customers with attractive <unk> profiles.
Speaker Change: Thank you Jonathan total revenue returned to growth in the third quarter up one 3% to seven $8 million.
Speaker Change: Revenue growth was restrained due to the partial quarter of tick tock, returning to the advertising market.
Speaker Change: But we want to keep much of our powder dry until we are ready for prime time with Guru shots to dot.
Speaker Change: And the continued expected declines at Guru shines.
Speaker Change: Across the company, we've identified five core strategic priorities for the remainder of the calendar year.
Speaker Change: Third quarter subscription revenue was up 13, 4% from last year.
Speaker Change: AI innovation, mainly expanding the rollout of tools like our AI audio generator and embedding AI across all departments in the company, including design engineering quality assurance marketing monetization and finance creator community empowerment by strengthening our.
Brian: And now net active subscriber growth trend continued to improve.
Brian: Up 37% year over year and sequentially for the eighth straight quarter.
As Jonathan mentioned, we also saw a shift towards lifetime subscription, which provides a recurring revenue source for two five years following sign up.
Speaker Change: <unk> community with opportunities to make money gain recognition and improve their skill base user and subscription growth with a particular focus on high value users Guru shots to dot O that is imagining what the next generation of Guru shops can be in order to drive stand alone.
Brian: Our deferred revenue of which the vast majority is related to our subscription revenue was $4 $9 million.
Brian: Deferred revenue has grown by 111% over the past seven quarters and has a 100% gross margin.
Speaker Change: Both in concert with meeting the needs of data seeds Dot AI and finally.
<unk> Premium's gross transaction value grew 4% versus last year, However, zeds premiums net revenue more than doubled this quarter.
Speaker Change: B to B expansion scaling data seeds dot AI and exploring new enterprise content licensing opportunities.
Speaker Change: We believe the structural improvements we have made will continue to become evident in Q4 fiscal year 'twenty five and be fully visible as we move into fiscal 'twenty six.
Brian: As Jonathan mentioned, the shift towards higher lifetime value or LTV users is important.
Brian: Subscriptions and hires edge premiums sales combined with our expertise in optimizing cost per impressions.
Speaker Change: When combined with continued product innovation and strategic discipline, we are positioned well to deliver sustained growth higher margins and long term value creation for shareholders.
Led to a record average revenue per monthly active user or <unk>.
Speaker Change: I would now like to call on <unk> to provide insights into our financial performance.
Brian: Up 33% from last year.
Brian: Good shot, which is reported under digital goods and services revenue.
Speaker Change: Thank you Jonathan total revenue returned to growth in the third quarter up one 3% to seven $8 million.
Brian: We remain a challenge.
Brian: Down 45% from last year.
Brian: Remember that as part of our cost savings initiatives, we cut user acquisition spending a guru shots wild goose shots to dot <unk> is in the planning stage.
Revenue growth was restrained due to the partial quarter of tick tock, returning to the advertising market.
Brian: This decline wasn't unexpected.
Speaker Change: And the continued expected declines at Guru shines.
Brian: Cost of revenue was five 8% for the quarter rough.
Speaker Change: Third quarter subscription revenue was up 13, 4% from last year.
Brian: Roughly flat year over year on an absolute basis, despite the pickup in revenue.
And our net active subscriber growth trend continued to improve.
Brian: SG&A decreased by 6% to $6 $3 million during the quarter.
Speaker Change: Up 37% year over year and sequentially for the eighth straight quarter.
Brian: This decrease was mainly driven by our restructuring initiatives and lower marketing spend at Guru shots, we had restructuring charges of zero point $6 million.
Speaker Change: As Jonathan mentioned, we also saw a shift towards lifetime subscription, which provides a recurring revenue source for two five years following sign up.
Brian: Related to all announced restructuring activities in late January and early February.
Speaker Change: Our deferred revenue of which the vast majority is related to our subscription revenue was $4 $9 million.
Brian: Versus no restructuring charges asset impairments in the year ago quarter.
Speaker Change: Deferred revenue has grown by 111% over the past seven quarters and has a 100% gross margin.
Brian: GAAP income from operations was zero point $2 million for the quarter compared to negative <unk> $1 million last year.
Speaker Change: <unk> Premium's gross transaction value grew 4% versus last year, however, zinc premiums net revenue more than doubled this quarter.
Brian: GAAP net income and EPS for the quarter was zero point $2 million.01, compared to zero point $1 million.01, respectively last year.
Speaker Change: As Jonathan mentioned, the shift towards higher lifetime value or LTV users is important.
Brian: non-GAAP net income and EPS were zero point $9 million in <unk> compared to 0.5 million dollar and three in the prior year.
Speaker Change: Subscriptions and hires edge premium sales combined with our expertise in optimizing cost per impressions led to a record average revenue per monthly active user or <unk>.
Brian: Cash flow from operations was zero point $9 million and free cash flow was zero point $8 million for the quarter.
Speaker Change: Up 33% from last year.
Speaker Change: Good shot, which is reported under digital goods and services revenue.
Brian: As Jonathan mentioned cash payments related to the restructuring and the retention bonuses tied to our 2022 acquisition of Guru shots negatively impacted free cash flow.
Speaker Change: We remain a challenge.
Speaker Change: 45% from last year.
Speaker Change: Remember that as part of our cost savings initiatives, we cut user acquisition spending a guru shots wild goose shots to donohoe is in the planning stage.
Brian: $1 million in aggregate.
Brian: We expect these payments to materially decline in Q4 to about $600000 and then be immaterial in FY 'twenty, six which is when the full impact of all $4 million in annualized cost reduction initiatives should start to show through.
Speaker Change: This decline wasn't unexpected.
Speaker Change: Cost of revenue was five 8% for the quarter rough.
Speaker Change: Roughly flat year over year on an absolute basis, despite the pickup in revenue.
Speaker Change: SG&A decreased by 6% to $6 $3 million during the quarter.
Brian: Adjusted EPS for the quarter increased 46% to $1.2 million.
Speaker Change: This decrease was mainly driven by our restructuring initiatives and lower marketing spend at Guru shots.
Brian: Note that depreciation and amortization decreased 61%.
Speaker Change: Restructuring charges of zero point $6 million.
Brian: About $350000 compared to last year.
Speaker Change: <unk>, two all announced restructuring activities in late January and early February.
Brian: Due to the impairment of capitalized software and technology development costs.
Speaker Change: <unk> no restructuring charges asset impairments in the year ago quarter.
Brian: From a liquidity standpoint, we finished the quarter with $24 million in cash and cash equivalents.
Speaker Change: GAAP income from operations was zero point $2 million.
Speaker Change: For the quarter compared to negative <unk> $1 million last year.
Brian: Which was up 2% sequentially, despite buying back 219000 shares for.
Speaker Change: GAAP net income and EPS for the quarter was zero point $2 million in.
Brian: $530000.
Speaker Change: <unk> compared to zero point, $1 million.01, respectively last year.
Brian: Fiscal year to date, we have repurchased nearly 700000 shares.
Brian: Thank you for listening to our third quarter earnings call and I look forward to speaking with you again on our year end call in October.
non-GAAP net income and EPS were zero point $9 million in <unk> compared to 0.5 million dollar and three in the prior year.
Speaker Change: Operator back to you for Q and a 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 the star keys.
Speaker Change: Cash flow from operations was zero point $9 million and free cash flow was zero point $8 million for the quarter.
Speaker Change: As Jonathan mentioned cash payments related to the restructuring and the retention bonuses tied to our 2022 acquisition of Guru shots negatively impacted free cash flow.
Speaker Change: To withdraw your question. Please press star two at this time, we will pause momentarily to assemble our roster.
Speaker Change: $1 million in aggregate.
Speaker Change: Once again, please press star one if you have a question or comment.
Speaker Change: We expect these payments to materially decline in Q4 to about $600000 and then be immaterial in FY 'twenty six.
Speaker Change: The first question comes from Allen Klee.
Speaker Change: Please proceed.
Speaker Change: Yes, hi, good job on this quarter definitely.
Speaker Change: When the full impact of all $4 million.
Speaker Change:
Speaker Change: Well congrats on that.
Speaker Change: Annualized cost reduction initiatives should start to show through.
Speaker Change: <unk>.
Speaker Change: Some questions.
Speaker Change: Look at your advertising revenue.
Speaker Change: Adjusted EPS for the quarter increased 46% to $1.2 million.
Speaker Change: And there is different pieces of that is there a way to kind of say like.
Speaker Change: If you had to rank the different pieces that go into that.
Speaker Change: Note that depreciation and amortization decreased 61%.
Speaker Change: Yeah.
Speaker Change: How you would rank the ones that had the biggest impact.
Speaker Change: Or about $350000 compared to last year.
Jonathan: Hi, Alan this is Jonathan thanks, so much for the.
Speaker Change: Due to the impairment of capitalized software and technology development costs.
Speaker Change: Congratulations.
Speaker Change: From a liquidity standpoint, we finished the quarter with $24 million in.
Speaker Change: No.
Speaker Change: We.
Are we pursue advertising as a comprehensive effort on our part.
Speaker Change: In cash and cash equivalents.
Speaker Change: It was up 2% sequentially, despite buying back 219000 shares for.
Speaker Change: So it's kind of hard to answer.
Speaker Change: That question with precision.
Speaker Change: <unk> $530000.
Speaker Change: And.
Speaker Change: A recurring theme.
Speaker Change: Fiscal year to date, we have repurchased nearly 700000 shares.
Speaker Change: We.
Speaker Change: Consistently.
Speaker Change: Broadcast is the.
Speaker Change: You for listening to our third quarter earnings call and I look forward to speaking with you again.
Speaker Change: Got it.
Speaker Change: Sanding.
Speaker Change: Team focused on.
Speaker Change: On our year end call in October.
Speaker Change: Optimizing CPM that is cost per thousand.
Speaker Change: Operator back to you for Q and a 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 the star keys.
Speaker Change: Metric.
Speaker Change: Is used to value our inventory.
Speaker Change: Okay and equity <unk> said during you said that.
Speaker Change: Came back at some point during the quarter does it feel.
Speaker Change: To withdraw your question. Please press star two at this time, we will pause momentarily to assemble our roster.
Speaker Change: How much how much of the quarter because you had your best for advertisers.
Speaker Change: Yes.
Speaker Change:
Speaker Change: I'm always said his song AARP.
Speaker Change: Once again, please press star one if you have a question or comment.
Speaker Change: You've ever put up and it was up like 33% year over year.
Speaker Change: The first question comes from Allen Klee.
Speaker Change: Sure.
Speaker Change: They're supportive of the overall market wasn't there for the whole quarter could you give us a sense of how long it was therefore argue.
Speaker Change: Please proceed.
Speaker Change: Yes, hi, good job on this quarter definitely.
Speaker Change: <unk>.
Speaker Change: You're hearing anything about it.
Speaker Change: Well congrats on that.
Speaker Change: And.
Speaker Change: Sure.
Speaker Change: Because we are hearing from some other advertising might be a little challenged.
Speaker Change: Some questions when I look at your advertising revenue that did well and there is different pieces of that is there a way to kind of say like.
Speaker Change: Sure.
Speaker Change: Just whatever you can tell us would be helpful.
Speaker Change: If you had to rank the different pieces that go into that.
Speaker Change: Okay.
Speaker Change: As you recall there was a ban of click talk in the U S. There was not lifted until mid February.
Speaker Change: How you would rank the ones that had the biggest impact.
Speaker Change: When it was lifted it took a little bit more time for the.
Speaker Change: Hi, Alan this is Jonathan thanks, so much for the.
Speaker Change: The numbers to come back for to get back into the market and so on and so forth.
Speaker Change: Congratulations.
Speaker Change: No.
Speaker Change: We.
Speaker Change: And.
Speaker Change: Are we pursue advertising as a comprehensive effort.
Speaker Change: They are all continue to be in the market very presence.
Speaker Change: Hi.
Speaker Change: On our part.
Speaker Change: I cannot.
Speaker Change: So it's kind of hard to answer.
Speaker Change: <unk> two.
Speaker Change: Speak to whatever.
Speaker Change: That question with precision.
Speaker Change: Policy decisions are made out of Washington.
Speaker Change: And.
Speaker Change: A recurring theme.
Speaker Change: Having said that.
Speaker Change: We.
Speaker Change: Consistently.
Speaker Change: They continue to.
Speaker Change: Broadcast is the.
Speaker Change: By end market and remain ever present.
Speaker Change: We've got an outstanding.
Speaker Change: Across advertising and marketing and all of the other.
Speaker Change: Team focused on.
Speaker Change: Optimizing CPM that is cost per thousand.
Speaker Change: Initiatives that.
Speaker Change: They are involved there.
Speaker Change: Metric that is used to value our inventory.
Speaker Change: Okay.
Speaker Change: Not understanding why.
Speaker Change: They came back with didn't come back for the full quarter maybe al.
Speaker Change: Okay.
Speaker Change: Said during you said that came.
Speaker Change: Came back at some point during the quarter does it feel.
Speaker Change: Less than half remember our quarter our quarter started February 1st they were not in the market for the entire quarter because of the ban was not lifted until mid February.
Speaker Change: How much how much of the quarter because you had your best for advertisers.
Speaker Change: I'm always saying this wrong AARP.
Speaker Change: Okay.
Speaker Change: You've ever put up and it was up like 33% year over year.
Speaker Change: So what had happened was both Google and.
Speaker Change: Their support of the overall market wasn't there for the whole quarter could you give us a sense of how long. It was therefore are you hearing anything about like.
Speaker Change: Alcohol were not availing users of our new new installs of the tick tock.
Speaker Change: And take talk was.
Speaker Change: Andy.
Speaker Change: And therefore, not investing marketing dollars and trying to get users to download their app.
Speaker Change: Because we are hearing from some other advertising might be a little challenged.
Speaker Change: Sure.
Speaker Change: Just whatever you can tell us would be helpful.
Speaker Change: When the government.
Paul: Thanks, Paul.
Paul: As you recall there was a ban click talk in the U S.
Speaker Change: Reversed.
Speaker Change: The ban.
Speaker Change: <unk> began to invest in user acquisition once again.
Paul: Not lifted until mid February.
When it was lifted it took a little bit more time for.
Speaker Change: And that has such a thing.
Speaker Change: We are on the market.
Paul: The numbers to come back for occupancy.
Speaker Change: What.
Paul: I can see.
Paul: Market and so on and so forth.
Speaker Change: Is there a <unk>.
Paul: And.
Speaker Change: I can't quantify specifically how much of this is kicked off.
Paul: They are all continue to be in the market very presence.
Speaker Change: <unk>, obviously one of the leading.
Paul: Hi.
Speaker Change: Mobile apps in the market they spend a lot of money on marketing.
Paul: I cannot venture too.
Paul: Speak to whatever.
Speaker Change: And.
Paul: Policy decisions are made out of Washington.
Speaker Change: <unk> has time and time again proven to be a very good user acquisition platform.
Paul: Having said that.
Paul: They continue to.
Speaker Change: For that.
Paul: By end market.
Paul: Remain ever present.
Speaker Change: With there.
Paul: Across advertising and marketing.
Speaker Change: Our reentry into the market.
Speaker Change: Dean.
Paul: All of the other.
Speaker Change: We monetize a good portion of our revenues through programmatic advertising.
Paul: Initiatives that they are involved there.
Speaker Change: Which is.
Speaker Change: Our marketplace buyers and sellers supply and demand.
Paul: Okay.
Paul: Still not understanding why.
Speaker Change: Then pricing.
Paul: They came back with it and come back for the full quarter maybe al.
Speaker Change: Having said that I also want to underscore what we had talked about with our focus.
Paul: Less than half remember our quarter our quarter started February 1st that they were not in the market for the entire quarter because of the ban was not lifted until mid February.
Speaker Change: Particularly from a marketing and user acquisition perspective.
Speaker Change: Being.
Speaker Change: Okay.
Speaker Change: Catering to.
Speaker Change: The users in well developed economies those well developed economies.
Paul: Okay.
Paul: So what had happened was both Google and <unk>.
Speaker Change: Carry more weight in terms of the CPM is that they can bring to the table.
Paul: Apple were not availing users of our new new installs of the tick tock App and tick tock was there.
Speaker Change: So that was also a.
Speaker Change: Significant piece of the overall improvement.
Paul: And therefore, not investing marketing dollars and trying to get users to download their app.
Speaker Change: Do you have anything you want to add.
Speaker Change: Yes, I mean, London come from long haul long lives.
Paul: When the government.
Speaker Change: We added in addition to <unk> and Abbott Admob.
Paul: Reverse.
Paul: The ban.
Paul: <unk> began to invest in user acquisition once again.
Speaker Change: I'll second mediation platform and we're constantly testing different ethanol man.
Paul: And that has such a big Bang.
Speaker Change: To get higher CPM inventory.
Paul: We are on the market.
Paul: What.
Paul:
Paul: Is there a <unk>.
Speaker Change: Okay.
Paul: I can't quantify specifically how much of this is kicked off.
Jonathan: I hope that answers your question I mean in the tissue to the reason why Jonathan mentioned.
Paul: <unk>, obviously one of the leading.
Jonathan: Got it okay.
Paul: Mobile apps in the market they spend a lot of money on marketing.
Thank you that's good color and then in terms of your monthly average monthly active users.
Paul: And.
Paul: <unk> has time and time again proven to be a very good user acquisition platform.
Jonathan: <unk>.
Speaker Change: I mean sure.
Speaker Change: Should we expect that to just to continue to kind of grind down or is anything what can you do to stabilize that.
Paul: For that.
Paul: With there.
Speaker Change: On loan growth.
Paul: Our reentry into the market.
Speaker Change: Great question. So we are working on stabilizing it in.
Paul: Being that.
Paul: We monetize a good portion of our revenues through programmatic advertising.
Speaker Change: Yes.
Speaker Change: The.
Paul: Which is.
Speaker Change: Our focus is really on.
Paul: Our marketplace buyers and sellers supply and demand.
Speaker Change: The well developed markets.
Paul: Then pricing.
Paul: Having said that I also want to underscore what we had talked about with our focus.
Speaker Change: We have seen some.
Speaker Change: Improvement I think.
Speaker Change: Made in May year over year, we were flat.
Paul: Particularly from a marketing and user acquisition perspective.
Speaker Change: And.
Speaker Change: We continue to refine and optimize our user acquisition spend.
Paul: Being.
Paul: Got it.
Paul: Catering to.
Speaker Change: Bring on high value users in those markets.
Paul: The users in well developed economies those well developed economies.
Speaker Change: We love users from all markets, but clearly we're prioritizing our focus.
Paul: Carry more weight in terms of the CPM is that they can bring to the table.
Speaker Change: Users.
Speaker Change: Can provide.
Speaker Change: A disproportionate impact too.
So that was also a.
Speaker Change: To our overall revenue stream.
Paul: Significant piece of the overall improvement.
Speaker Change: From well developed markets and.
Speaker Change: To that end we have expanded.
Paul: Do you have anything you want to add.
Speaker Change: <unk> expanded our investment in user acquisition for the edge marketplace.
Speaker Change: Yes, I mean, London come from long haul long lives.
We added in addition to <unk> and Abbott at Bob.
Speaker Change: Over the course of the last quarters with attractive return on AD spend users.
Speaker Change: I'll second mediation platform and we're constantly testing different ethanol man.
Speaker Change: And that ultimately drives more revenue for the company, even though we have lost you.
Speaker Change: To get higher CPM call inventory.
Speaker Change: Users in.
Speaker Change: Okay.
Speaker Change: Less well developed.
Speaker Change: I hope that answer your question I mean in the tissue to the reason why Jonathan mentioned.
Speaker Change: Developing economies.
Speaker Change: Got it okay.
Speaker Change: Emerging markets and the like.
Speaker Change: Thank you that's good color and then in terms of your monthly average monthly active users.
Speaker Change: Okay got it.
Speaker Change: In terms of.
Speaker Change: <unk>.
Speaker Change: I mean sure.
Speaker Change: You had.
Speaker Change: <unk> is one of the things was.
Speaker Change: Should we expect that to just to continue to kind of grind down or anything what can you do to stabilize that.
Speaker Change: The new feature of merger Idiot Sandbox could you comment on that.
Speaker Change: On loan growth.
Speaker Change: What youre doing there.
Speaker Change: Great question. So we are working on stabilizing it in.
Speaker Change: Yes.
Speaker Change: <unk>.
Speaker Change: Yes.
Speaker Change: <unk> been testing new features such as create your own emoji with AI or some many emerging games.
Speaker Change: The.
Speaker Change: Our focus is really on.
Speaker Change: The well developed markets.
Speaker Change: We are really focused on the upcoming release of digital.
Speaker Change: We have seen some.
Speaker Change: <unk>.
Speaker Change: Improvement I think made in may year over year, we were flat.
Speaker Change: Digital stickers, which will be an adjacent vertical.
Speaker Change: And we planned that for World Emoji day.
Speaker Change: And.
Speaker Change: We continue to refine and optimize our user acquisition spend.
Speaker Change: Which takes place in July.
Speaker Change: It will be our first foray into a brand new.
Speaker Change: Bring on high value users in those markets.
Speaker Change: Content type.
Speaker Change: We love users from all markets, but clearly we're prioritizing our focus.
Speaker Change: Which is not <unk> driven.
Speaker Change: And our hope is that.
Speaker Change: Users.
Speaker Change: Based upon the similarity of similarity in terms of use of emojis and stickers that.
Speaker Change: Can provide.
Speaker Change: A disproportionate impact.
Speaker Change: To our overall revenue stream.
Speaker Change: That will drive additional interest traffic and engagement.
Speaker Change: From well developed markets and.
Speaker Change: To the platform.
Speaker Change: To that end we have.
Speaker Change: Expanded our investment in user acquisition for the edge marketplace.
Speaker Change: Okay.
Speaker Change: Over the course of the last quarters with attractive return on AD spend users.
Speaker Change: In terms of <unk>.
Speaker Change: <unk>.
Speaker Change: Premium in the marketplace.
Speaker Change: And that ultimately drives more revenue for the company, even though we have lost you.
Speaker Change:
Speaker Change: Wood.
Speaker Change: Yes.
Speaker Change: Last quarter, you talked about China.
Speaker Change: Users in.
Speaker Change: Okay.
Speaker Change: You're rewarded video.
Speaker Change: Less well developed.
Speaker Change: <unk>.
Speaker Change: Developing economies.
Speaker Change: And.
Speaker Change: Good conversion rates.
Speaker Change: Any commentary on that.
Speaker Change: Emerging markets and the like.
Speaker Change: The factors affecting.
Speaker Change: Okay got it.
Speaker Change: The marketplace is GTD.
Speaker Change: In.
Speaker Change: <unk>.
This quarter.
Speaker Change: With the merger PV is one of the things was.
Speaker Change: Thinking year over year.
Speaker Change: I'm sorry, it was hard to hear can you repeat the question.
Speaker Change: Yeah.
Speaker Change: The new feature of the merger Idiot sandbox could you comment on that.
Speaker Change: Just commenting on your premium how you're.
Speaker Change: What youre doing there.
Speaker Change: Have you thought about how it performed in <unk>.
Speaker Change: Yes.
Speaker Change: <unk>.
Speaker Change: Nick.
Speaker Change: <unk>.
Speaker Change: Main things Youre working on there related to it.
Speaker Change: <unk> been testing new features such as create your own emoji with AI or some many emerging games.
Speaker Change: That premium continues to be.
Speaker Change: A core part of the overall marketplace and our.
Speaker Change: We are really focused on the upcoming release of.
Speaker Change: Digital stickers, which will be an adjacent vertical.
Speaker Change: So our processes to.
Speaker Change: To bring on new artists and provide them with tooling.
Speaker Change: And we planned that for World Emoji day.
Speaker Change: That will.
Speaker Change: Which takes place in July.
Speaker Change: Enable.
Speaker Change: It will be our first foray into a brand new.
Speaker Change: Revenue creation for them.
Speaker Change: The.
Speaker Change: Content type.
Speaker Change: Major thing that has happened over the course of last couple of months has been that we've also made zed premium content available on web.
Speaker Change: Which is not <unk> driven.
Speaker Change: And our hope is that.
Speaker Change: Based upon the similarity of similarity in terms of use of emojis and stickers that.
Okay.
Speaker Change: Yes.
Speaker Change: That opens up a new.
Speaker Change: That will drive additional interest traffic and engagement.
Speaker Change: Channel four customers.
Speaker Change: Customers to ultimately purchase back content.
Speaker Change: To the platform.
Speaker Change: So with that in mind that will continue that is that investment in terms of our community will continue to be piece of this.
Speaker Change: Okay.
Speaker Change: In terms of <unk>.
Speaker Change: Then separately, although we have not.
Speaker Change: <unk>.
Speaker Change: You haven't asked about it we look at our creator community on.
Speaker Change: Premium marketplace.
Speaker Change:
Speaker Change: On a comprehensive basis both in.
Speaker Change: Wood.
Speaker Change: Okay.
Speaker Change: These edge marketplace and in Guru shots as being a very strategic asset.
Speaker Change: Last quarter, you talked about China.
Speaker Change: We rewarded video usage.
Speaker Change: That.
Speaker Change: We can turn to four.
Speaker Change: And.
Content on demand.
Speaker Change: You had good conversion rates.
Speaker Change: Needs there.
Speaker Change: Any commentary on that.
Speaker Change: Come to light because of.
Speaker Change: The factors affecting.
Speaker Change: <unk> Dot AI.
Speaker Change: Hmm marketplaces GTD.
Speaker Change: The new business to business marketplace that we had announced last week.
Speaker Change: This quarter.
Speaker Change: Thinking year over year.
Speaker Change: Focusing on.
Speaker Change: I'm sorry, it was hard to hear can you repeat the question.
Speaker Change: Curating.
Speaker Change: Just just commenting on your <unk> premium.
Speaker Change: And creating content to meet the needs of.
Speaker Change: How you are.
Speaker Change: How you thought about how it performed in <unk>.
Speaker Change: Foundational AI companies.
Speaker Change: The.
Speaker Change: In terms of.
Speaker Change: Main things Youre working on there related to it.
Speaker Change: The refining and tuning their respective Mas.
Speaker Change: That premium continues to be.
Speaker Change: Models.
Speaker Change: Accordingly.
Speaker Change: Okay.
Speaker Change: A core part of the overall marketplace and our.
Speaker Change: Yes that sounds very powerful.
Speaker Change: Thought processes to.
Speaker Change: In terms of.
Speaker Change: We need to bring on new artists and provide them with tooling.
Speaker Change: So for data seed.
Speaker Change: Justin.
Speaker Change: That will.
Speaker Change: When do you think.
Speaker Change: Enable.
Speaker Change: Revenue creation for them.
Speaker Change: You've announced the transaction.
Speaker Change: The.
Speaker Change: How do you think that have this gets rolled out.
Speaker Change: Major thing that has happened over the course of last couple of months has been that we've also made that premium content available on web.
Speaker Change: So we are actively in the market.
Speaker Change: Building relationships with perspective.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: That opens up a new.
Speaker Change: Customers.
Speaker Change: Channel four cut.
Speaker Change: And.
Speaker Change: Customers to ultimately purchase back content.
Speaker Change: In addition to that we have also published a research paper in conjunction with Pearl Dot AI and ml research demonstrating that our.
Speaker Change: So with that in mind that will continue that is that investment in terms of our community will continue to be piece of this.
Speaker Change: Dataset.
Speaker Change: Then separately, although we have not.
Speaker Change: Has advantages for.
Speaker Change: You haven't asked about it we look at our creator community on.
Speaker Change: Automated recognition system visual.
Speaker Change: On a comprehensive basis both in.
Speaker Change: Recognition systems.
Speaker Change: The search marketplace and in Guru shots as being a very strategic asset.
Speaker Change: And that is a marketing effort clearly to get our name out there we've been very highly ranked on hugging face since we published that paper.
Speaker Change: <unk>.
Speaker Change: We can turn to four.
Speaker Change: And.
Speaker Change: Content on demand.
Speaker Change: With any.
Speaker Change: Needs there.
Speaker Change: New <unk> product for US. This is really brand new we're now ceding the market no pun intended.
Speaker Change: Come to light because of.
Speaker Change: <unk> Dot AI.
Speaker Change: The new business to business marketplace that we had announced last week.
Speaker Change: And building those relationships so that we can.
Speaker Change: Meet these bespoke needs one of the problems that.
Speaker Change: Focusing on.
Speaker Change: Curating.
Speaker Change: We have.
Speaker Change: And creating content to meet the needs of.
Speaker Change: Come to recognize is that many of these foundational models.
Speaker Change: Foundational AI companies.
Speaker Change: Are not able to source.
Speaker Change: In terms of.
Speaker Change: These unique needs that they have.
Speaker Change: Refining and tuning their respective.
Speaker Change: Models.
Speaker Change: With materiality.
Speaker Change: Accordingly.
Speaker Change: Okay.
Speaker Change: In a short period of time.
Speaker Change: Yes that sounds very powerful.
Speaker Change: And the promise that we bring to the table as being able to fill that need.
Speaker Change: <unk>.
Speaker Change: In terms of.
Speaker Change: So for data seed.
Speaker Change: So clearly if we just look at images on the <unk> side of the house.
Speaker Change: Justin.
Speaker Change: When do you think.
Speaker Change: That's a model has a specific need of.
Speaker Change: You've announced the transaction.
Speaker Change: How do you think that have this gets rolled out.
Speaker Change: Unique content.
Speaker Change: That is not something that they can readily get their hands on.
Speaker Change: So we are actively in the market.
Speaker Change: We can reach out we can launch a competition.
Speaker Change: Building relationships with perspective.
Speaker Change: Or <unk>.
Speaker Change: Even engage with our.
Speaker Change: Customers.
Speaker Change: Photo enthusiasts and our community in order to.
Speaker Change: And.
Speaker Change: In addition to that we have also published a research paper in conjunction with Pearl Dot AI and ml research demonstrating that our.
Speaker Change: Our mass <unk>.
Speaker Change: Volume associated with that particular need.
Speaker Change: Of course, we can't handle every request that is on the market but.
Speaker Change: Dataset.
Speaker Change: Has advantages for.
Speaker Change: Yes.
Speaker Change: For example.
We're not providing photographs of.
Speaker Change: Automated recognition system visual record.
Speaker Change: Internal organs, which are really important for AI models and.
Speaker Change: Recognition systems.
Speaker Change: And that is a marketing effort clearly to get our name out there we've been very highly ranked on hugging face since we published that paper.
Speaker Change: Now.
Speaker Change: Diseases are recognized and discovered in Sonic so forth.
Speaker Change: Yet there are many many use cases and just to mention one.
Speaker Change: And.
Speaker Change: With any.
Speaker Change: We've come across.
Speaker Change: New <unk> product for US. This is really brand new we're now ceding the market no pun intended.
Speaker Change: <unk>.
Speaker Change: Entity, that's trying to build a model that will render shadows.
Speaker Change: And building those relationships so that we can.
Speaker Change: Accurately.
Speaker Change: That's a very complex question.
Speaker Change: Meet these bespoke needs one.
Speaker Change: If you just take us by way.
Speaker Change: One of the problems that.
Speaker Change: For example, <unk>.
Speaker Change: Sitting in your office, the curtains or open you've got overhead lighting Howard Shadows render.
Speaker Change: We have.
Speaker Change: Come to recognize is that many of these foundational models.
Speaker Change: That's the sort of stuff that we can.
Speaker Change: Are not able to source.
Speaker Change: Lots and lots of images in a relatively short period of time in order to help refine that model.
Speaker Change: These unique needs that they have.
Speaker Change: With materiality.
Speaker Change: In a short period of time.
Speaker Change: That's very interesting okay.
Speaker Change: And the promise that we bring to the table as being able to fill that need.
Speaker Change: Thank you.
Speaker Change: Terms.
Speaker Change: On.
Speaker Change: You talked about rolling out an audio.
Speaker Change: So clearly if we just look at images on the <unk> side of the house.
Speaker Change: AI.
Speaker Change: What would what would that look like.
Anthony: Anthony model has a specific need of.
Speaker Change: Like a ringtone or is it.
Speaker Change: Unique content.
Speaker Change: How should that.
Speaker Change: And when do you think that coming out I think it's somewhat near term.
Speaker Change: That is not something that they can readily get their hands on.
Speaker Change: We're going to be rolling it out on a.
Speaker Change: We can reach out we can launch a competition.
Speaker Change: Limited basis first.
Speaker Change: Or <unk>.
Speaker Change: Even engage with our.
Speaker Change: Before the end of June.
Speaker Change: Photo enthusiasts and our community in order to.
Speaker Change: And then we will scale and based upon iterative feedback and so on and so forth.
Speaker Change: Our mass <unk>.
Speaker Change: It will be a feature within the marketplace and just as with.
Speaker Change: Volume associated with that particular need.
Speaker Change: Of course, we can't handle every request that is on the market but.
Speaker Change: Jan AI imagery today, a user will essentially be able to go in and create.
Speaker Change: Yes.
Speaker Change: For example.
Speaker Change: A ringtone or and ringtail it doesn't necessarily mean that it's strictly music it can be a funny sound.
Speaker Change: We're not providing photographs of.
Speaker Change: Internal organs, which are really important for AI models.
Speaker Change: How.
Speaker Change: Just by way of example, but a user will prompt.
Speaker Change: Diseases are recognized and discovered in size and so forth.
Speaker Change: And based upon their crop.
Speaker Change: Yes, there are many many use cases and just to mention one.
Speaker Change: They will get the content.
Speaker Change: Are they will create the content that they are profit.
Speaker Change: We've come across there as a.
Speaker Change: Entity, that's trying to build a model that will render shadows.
Speaker Change: So this would be.
Speaker Change: It would be somewhat.
Speaker Change: Accurately.
Speaker Change: Premium price versus.
Speaker Change: That's a very complex question.
Speaker Change: If you just take us by way of example, you're sitting in your office, the curtains or open you've got overhead lighting Howard Shadows render.
Speaker Change: Well.
Speaker Change: The business model is something where I imagine that it will be somewhat available on our subscription offering and for those users that.
Speaker Change: That's the sort of stuff that we can.
Speaker Change: Do not subscribe.
Speaker Change: Lots and lots of images.
Speaker Change: They put up some sort of a paywall or advertising paywall. That's that's.
Speaker Change: In a relatively short period of time in order to help refine that model.
Speaker Change: All being worked on as we speak.
Speaker Change: That's very interesting okay.
Speaker Change: Okay, but this could just.
Speaker Change: To help with the momentum.
Speaker Change: Thank you.
Speaker Change: With subscriptions.
Speaker Change: In terms of.
Speaker Change: You talked about rolling out an audio audio AI.
Speaker Change: Yes, that's correct in addition to that.
Speaker Change: From a.
Speaker Change: What would what would that look like.
Speaker Change: Timing perspective.
Speaker Change: Like a ringtone or is it.
Speaker Change: Audio is still rather nascent.
Speaker Change: How should that.
Speaker Change: In this type of consumer.
Speaker Change: And when do you think that coming out I think is somewhat near term.
Speaker Change: Offering in the marketplace.
Speaker Change: We're going to be rolling it out on a.
Speaker Change: And we.
Speaker Change: We are hopeful that we can benefit from <unk>.
Speaker Change: Limited basis first.
Speaker Change: Entering.
Speaker Change: Before the end of June.
Speaker Change: At an early point in time.
Speaker Change: And then we will scale and based upon iterative feedback and so on and so forth.
Speaker Change: Which could lead to more users coming to us to engage with this new feature.
Speaker Change: It will be a feature within the <unk> marketplace.
Speaker Change: And just as with.
Speaker Change: That's what our that's what we're <unk>.
Speaker Change: <unk> four.
Speaker Change: <unk> AI imagery today, a user will essentially be able to go in and create.
Speaker Change: Okay.
Speaker Change: Great.
Speaker Change:
Speaker Change: So just what I heard you say.
A ringtone or and ringtail it doesn't necessarily mean that it's strictly music it can be a funny sound.
Speaker Change: Good morning. Thank you said, you think year over year improvement in bottom line metrics.
Speaker Change: Yes.
Speaker Change: Just by way of example, but a user will prompt.
Speaker Change: To become more visible next quarter.
And based upon their crops.
Speaker Change: What you've done in the cost structure.
Speaker Change: They will get the content that.
Speaker Change: <unk>.
Speaker Change: Taking into account traditional seasonality.
Speaker Change: Are they will create the content that they are profit.
Speaker Change: The next quarter.
Speaker Change: So this would be.
Speaker Change: There's a little is it a little slower because of the summer time or.
Speaker Change: It would be somewhat brief.
Speaker Change: Price versus.
Speaker Change: And could you remind us what you've said about the.
Speaker Change: Well.
Speaker Change: Yes.
Speaker Change: The restructuring or the.
Speaker Change: Well, yes, the business model is something where I imagine.
Speaker Change: Our retention.
Speaker Change: Was that you said will happen in fiscal fourth quarter.
Speaker Change: Will it be somewhat available on our subscription offering and for those users that.
Speaker Change: Sure so for the specific numbers I'm going to have a.
Speaker Change: Do not subscribe.
Speaker Change: Answer in your question in terms of.
Speaker Change: <unk> put up some sort of a paywall or advertising paywall. That's that's all being worked on as we speak.
Speaker Change: Let's call it.
Speaker Change: Seasonality in the business.
Speaker Change: As I think you know typically.
Speaker Change: Okay, but this could just.
Speaker Change: To help with the momentum.
Speaker Change: Our Q4 is a little bit later because of the summer months.
Speaker Change: With subscriptions.
Speaker Change: Our months of May June.
Speaker Change: Yes, that's correct in addition to that.
Speaker Change: July our fiscal year begins on August one.
Speaker Change: From a.
Speaker Change: At the same point in time.
Speaker Change: Timing perspective.
Speaker Change: Audio is still rather nascent.
Speaker Change: We are still.
Speaker Change: In this type of consumer.
Speaker Change: Very very.
Speaker Change: <unk>.
Speaker Change: Offering in the marketplace.
Speaker Change: Focused on making sure that we're growing the business.
Speaker Change: And we.
Speaker Change: We are hopeful that we can benefit from <unk>.
Speaker Change: When you say grown the business that we're doing including the top line.
Speaker Change: Entering.
Speaker Change: At an early point in time.
Speaker Change: Okay.
Speaker Change: Which could lead to more users coming to us to engage with this new feature.
Speaker Change: Yes, that's correct.
Speaker Change: Okay, great and.
Speaker Change: That's what our that's what we're hoping for.
Speaker Change: And then but.
Speaker Change: I'll just I'll underscore.
Speaker Change: The obvious as well.
Speaker Change: Okay.
Speaker Change: It was very clear from both these comments and my comments.
Speaker Change: Great.
Speaker Change: So just what I heard you say.
Speaker Change: Yes.
Speaker Change: Our cash flow has.
Speaker Change: Good morning. Thank you said, you think year over year improvement in bottom line metrics.
Speaker Change: And we will continue to be outstanding.
Speaker Change: The restructuring certainly is helping us I think that we said that there could be up to another like $4 million of cash flow.
Speaker Change: We've become more visible next quarter.
Speaker Change: What you've done in the cost structure.
Speaker Change: Yeah.
Speaker Change: Taking into account traditional seasonality.
Speaker Change: The restructuring the restructuring has unfolded very very well.
Speaker Change: The next quarter.
Speaker Change: The fact that the <unk> shot.
Speaker Change: There's a little is it a little slower because of the summer time or.
Speaker Change: Retention bonuses almost completely behind us from a payout perspective.
Speaker Change: And could you remind us what you've said about the.
Speaker Change: And the fact that we have.
Speaker Change: The restructuring or the routes.
Speaker Change: <unk> are not held but.
Speaker Change: Our retention.
Speaker Change: Was that you said will happen in fiscal fourth quarter.
Speaker Change: Cut back on you.
Speaker Change: User acquisition spend for jewelry shops, while we.
Speaker Change: Sure so for the specific numbers I'm going to have a.
Speaker Change: Yes, thats around what our shops, two data will ultimately be.
Speaker Change: Answer in your question in terms of.
Speaker Change: All of those are.
Speaker Change: Let's call it.
Speaker Change: Contributing to our improved cash flow.
Speaker Change: Seasonality in the business.
Speaker Change: So from a cash flow perspective.
Speaker Change: As I think you know typically.
Speaker Change: Our Q4 is a little bit later because of the summer.
Speaker Change: I would.
Speaker Change: Would underscore that we're doing really really nicely you may want to get into some of the more.
Speaker Change: The months of May June.
Speaker Change: July our fiscal year begins on August one.
Speaker Change: Specific numbers.
Speaker Change: About <unk>.
Speaker Change: At the same point in time.
Speaker Change: The retention bonus and other.
Speaker Change: We are.
Speaker Change: Phil.
Speaker Change: Yes, hi.
Speaker Change: Very very.
Speaker Change: Alan is interested in.
Speaker Change: Focused on making sure that we're growing the business.
Speaker Change: Alright, so the tail end of <unk>.
Speaker Change: Restructuring charges in Q4 would be about 325000.
Speaker Change: When you say growing the business, including the topline.
Speaker Change: This is because the accounting standard.
Speaker Change: Alright.
Speaker Change: We came only expands and payout.
Speaker Change: Sure.
Speaker Change: Yes, that's correct.
Speaker Change: During the period tenant retention period as to what's to come.
Speaker Change: Okay, great and.
Speaker Change: So after July it will be will be gone in terms of charges, but some.
Speaker Change: And then but.
Speaker Change: Ill just ill underscore.
Speaker Change: Severance payments will be paid.
Speaker Change: The obvious SaaS.
Speaker Change: Was very clear from both these comments and my comments.
Speaker Change: The next.
Speaker Change: Client months up to year.
Speaker Change: Okay.
Speaker Change: Our cash flow has.
Speaker Change: And in terms of retention bonuses.
Speaker Change: And we will continue to be outstanding.
Speaker Change: We have charge everything to the P&L, but the cash payment.
Speaker Change: The restructuring certainly is helping us I think that we said that there could be up to another like $4 million of cash flow.
Speaker Change: Last payment was actually may in May.
Speaker Change: The April.
Speaker Change: Payroll if you will.
Speaker Change: Which was about 323000.
Speaker Change: Because of the restructuring the restructuring has unfolded very very well.
Speaker Change: So Q4 accounting, we will cash flow be violence 600000 related to the <unk>.
Speaker Change: The fact that the fewer shot.
Speaker Change: Retention bonuses almost completely behind us from a payout perspective, and the fact that we have.
Speaker Change: Pension bonus and related to restructuring charges.
Speaker Change: I hope that answered your question.
Speaker Change: Panels are not held but.
Speaker Change: Yes.
Speaker Change: Cut back on.
Speaker Change: Thank you.
Speaker Change: User acquisition spend for jewelry shops, while we.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Most of the things I wanted to.
Speaker Change: Yes.
Speaker Change: It turns around and what her shots to data will ultimately be.
Speaker Change:
Speaker Change: Okay, I think thats all my questions.
Speaker Change: All of those are.
Speaker Change: This was a very good quarter. So thank you and congrats.
Speaker Change: Contributing to our improved cash flow.
Speaker Change: Thank you al.
Speaker Change: So from a cash flow perspective.
Speaker Change: I would.
Speaker Change: Thank you. This concludes our question and answer session and conference call. Thank you for attending today's presentation. You may now disconnect.
Speaker Change: I would underscore that we're doing really really nicely you may want to get into some of the more.
Speaker Change: Specific numbers.
Speaker Change: <unk>.
Speaker Change: The retention bonus and other.
Speaker Change: Yes, hi.
Speaker Change: Alan is interested in.
Speaker Change: Alright, so the tail end of it.
Speaker Change: Restructuring charges in Q4 would be about 325000.
Speaker Change: This is because of the accounting standard.
Speaker Change: We came only expense and pay out.
Speaker Change: During the during the period of tenant retention period is still with the company.
Speaker Change: So after July it will be it will be gone in terms of charges, but some.
Speaker Change: Seven this payment will be paid.
Speaker Change: The next.
Speaker Change: Volume months.
Speaker Change: Hi.
Speaker Change: And in terms of retention bonus.
Speaker Change: We have charge everything to the P&L, but the cash payment. The last payment was actually may in may.
Speaker Change: Well the April.
Speaker Change: Payroll if you will.
Speaker Change: Which was about 323000.
Speaker Change: So Q4 accounting, we will cash flow between 600000 related to the <unk>.
Speaker Change: Pension bonus and related to restructuring charges.
Speaker Change: I hope that answered your question.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Most of the things I wanted.
Speaker Change:
Speaker Change: Okay, I think thats all my questions.
Speaker Change: This was a very good quarter. So thank you and congrats.
Speaker Change: Thank you al.
Speaker Change: Thank you. This concludes our question and answer session and conference call. Thank you for attending today's presentation. You may now disconnect.
Operator: 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 two.
Brian Siegel: I will now turn the call over to Brian Siegel. Thank you, Operator.
Unnamed Speaker: During today's call, Jonathan Reich, Zedge's Chief Executive Officer, and Yi Tsai, Zedge's Chief Financial Officer, will discuss Zedge's financial and operational results that were reported today. Any forward-looking statements made during this conference call during the prepared marks 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 calls. These risks and uncertainties include, but are not limited to, specific risks and uncertainties disclosed in Zedge's periodic SEC filing. Zedge 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.
Unnamed Speaker: Please note that our earnings release is available on the investor relations page of the Zedge website, and it has also been filed on Form 8K with the SEC.
Unnamed Speaker: Finally, on this call, we will use non-GAAP measures. Examples include non-GAAP EPS, non-GAAP net income, and adjusted EBITDA. Please see our earnings release for an explanation of our use of these non-GAAP measures.
Brian Siegel: And I would like to turn the call over to Jonathan. Thank you, Brian.
Jonathan Reich: Good afternoon, everyone, and thank you for joining us today to discuss Zedge's third quarter fiscal 2025 results. Q3 marked a return to revenue growth for Zedge, highlighting the resilience of our business despite an ad market that saw some disruption due to TikTok's absence from the U.S. until mid-February, along with tariff-related uncertainty that caused macroeconomic volatility and expected softness at GuruShots, where we scaled back user acquisition to focus on what GuruShots 2.0 will become.
Jonathan Reich: The $4 million in annualized gross cost savings from our global restructuring and other cost-reduction items also began to materialize during the quarter. The closure of our operations in Norway, the streamlining of the GuruShots team, and the associated decrease in discretionary spend, especially in lowering GuruShots' marketing investment, helped return us to profitability on a gap basis and boosted our profitability on a non-gap basis. Furthermore, adjusted EBITDA increased 46% year over year, and we generated $0.8 million in free cash flow. Notably, free cash flow includes approximately $1 million for certain payments made during the quarter, primarily severance related to our restructuring and a portion of the final installment of the retention bonus stemming from the 2022 GuruShots acquisition.
Jonathan Reich: In Q4, the benefits to free cash flow should further improve as we anticipate a total of about $600,000 in restructuring-related severance and the final payout of the Gurushots retention pool. We expect to complete restructuring-related cash severance payments in the first half of fiscal year 2026, totaling approximately $200,000.
Jonathan Reich: Our balance sheet remains strong. We ended the quarter with $20.4 million in cash and no debt, even after repurchasing 219,000 shares under our previously announced $5 million buyback authorization. Key business highlights for the quarter included, we grew the Zedge Plus subscriber base to an all-time high of nearly 900,000, a 37% year-over-year increase. Zedge Plus subscription revenue grew 13% year-over-year, while deferred revenue, primarily representing future recurring subscription revenue, reached $5 million, up 83% year-over-year and 13% sequentially, and Zedge premium revenue more than doubled, driven by expanding the offering to our web users, increased usage of our Paint AI image generator, and ongoing demand for 3D parallax wallpapers.
Jonathan Reich: While monthly active users, or MAU, declined year over year, the narrative is more nuanced. For a while now, we have focused on attracting and retaining higher lifetime value, or LTV users, which are reported as MAU in well-developed markets in the supplemental tables of our earnings release. The overall MAU decrease was the outcome of a mix shift away from lower LTV users globally to higher LTV users in well-developed markets. These efforts to focus on higher LTV users who are more likely to subscribe, make purchases, and engage more often and more deeply with our content and features are bearing fruit.
Jonathan Reich: And thus, we continue to focus on attracting and retaining this part of our base. Additionally, our focused investment in paid user acquisition plays an important role in this success across both Android and iOS. And the positive trends are clearly reflected in our key performance metrics. Average revenue per monthly active user increased by 33% year over year, indicating that we're monetizing each user more efficiently. Deferred subscription revenue continued to climb, with lifetime plans capturing a larger part of the overall mix. For lifetime plans, the user prepays the full amount at purchase, requiring us to pay the entire app store fee up front.
Jonathan Reich: This allows us to recognize 100% gross margins on the deferred revenue as it is recognized monthly over the subsequent 30 months. And critically, key user metrics within well-developed economies have started to stabilize, hopefully positioning us for a return to growth in the future and reinforcing that the product and monetization strategies we have implemented resonate where they matter most. MAU stabilization remains a focus, but not at any cost. Our priority is to grow our customer base of high LTV users who engage with our product regularly. And we're confident that our performance marketing efforts and product roadmap are assisting us in achieving these goals.
Jonathan Reich: Looking ahead, innovation across our platform remains key to driving growth.
Jonathan Reich: We recently announced the launch of DataSeeds.ai, a B2B content marketplace that focuses on supplying enterprise customers in need of both on-demand and off-the-shelf datasets. Initially focused on images, enriched with detailed metadata for AI training. DataSeeds.ai leverages our growing content library of over 30 million rights-cleared images, our prolific community of photographers and graphic designers, and our existing marketplace infrastructure and know-how. We aim to become the go-to source for pre-training and fine-tuning AI datasets, meeting the needs of foundational model developers for high-quality, authentic, and diverse rights-cleared content at scale.
Jonathan Reich: Last week, we signed our first agreement with a leading global AI technology company, validating both the market opportunity and the value of what we have to offer. This initiative opens up a nascent new revenue source with the potential for not only reoccurring revenue, but also potential recurring revenue streams for us, while also providing our creators with more ways to monetize their work. Looking ahead, we are exploring opportunities to expand our offerings beyond images and provide additional mediums, including video and audio, as well as other commercially viable data types. We believe that this seminal business expansion supports our conviction that investing in and nurturing our vibrant artist community is a critical differentiator that will enable us to scale up quickly.
Jonathan Reich: We are also about to roll out an AI audio generator as part of Paint, our Gen AI creation suite that allows users to harness the power of AI to generate custom ringtones and notification sounds with simple text prompts. This is a major milestone in our AI roadmap, positioning us as one of the first consumer platforms to enable user-generated audio content at scale. It also solidifies our leadership in mobile personalization.
Jonathan Reich: Emojipedia remained stable during the quarter and continues to evolve with the expected release of digital stickers, a new vertical on World Emoji Day, which is celebrated in July. We're also inching toward the introduction of a full-site redesign to improve user experience and engagement.
Jonathan Reich: As discussed last quarter, we are ideating about what GuruShots 2.0 can and will be. Part of the undertaking revolves around the core game, including onboarding, progression, the voting mechanic, and reward dynamics. At the same time, we are also thinking about how to better meet the needs that we envision are critical for DataSeeds.ai to scale effectively.
Jonathan Reich: As expected, GuruShots' revenue declined year over year, primarily due to our decision to materially decrease our paid user acquisition spend. Fortunately, the investments we have made are yielding customers with attractive ROAS profiles, but we want to keep much of our powder dry until we're ready for primetime with GuruShots 2.0.
Jonathan Reich: Across the company, we've identified five core strategic priorities for the remainder of the calendar year. AI innovation, mainly expanding the rollout of tools like our AI audio generator, and embedding AI across all departments in the company, including design, engineering, quality assurance, marketing, monetization, and finance. Creator Community Empowerment, by strengthening our creator community with opportunities to make money, gain recognition, and improve their skill base. User and Subscription Growth, with a particular focus on high-value users. Gurushots 2.0, that is, imagining what the next generation of Gurushots can be in order to drive standalone growth in concert with meeting the needs of DataSeeds.ai.
Jonathan Reich: And finally. B2B Expansion, ScalingDataSeeds.ai, and Exploring New Enterprise Content Licensing Opportunities. We believe the structural improvements we've made will continue to become evident in Q4 fiscal year 25 and be fully visible as we move into fiscal 26. When combined with continued product innovation and strategic discipline, we are positioned well to deliver sustained growth, higher margins, and long-term value creation for shareholders.
Yi Tsai: I would now like to call on Yi to provide insights into our financial performance. Thank you, Jonathan. Total revenue returned to growth in the third quarter, up 1.3% to $7.8 million. Revenue growth was restrained due to the partial quarter of TikTok returning to the advertising market. and the continued expected declines at Gurusha. Third quarter subscription revenue was up 13.4% from last year and our net active subscriber growth trend continued to improve, up 37% year over year and sequentially for the eighth straight quarter. As Jonathan mentioned, we also saw a shift towards lifetime subscription, which provides recurring revenue source for 2.5 years following sign-up.
Yi Tsai: Our deferred revenue, of which the vast majority is related to our subscription revenue, was $4.9 million. Deferred revenue has grown by 111% over the past 7 quarters and has a 100% growth margin. Zedge Premium's gross transaction value grew 4% versus last year. However, Zedge Premium's net revenue more than doubled this quarter. As Jonathan mentioned, the shift towards higher lifetime value or LTV users is important as subscriptions and higher Zedge premium sales, combined with our expertise at optimizing costs per impressions, led to a record average revenue per monthly active user of $0.10, up 33% from last year.
Yi Tsai: GuruShot, which is reported under digital goods and services revenue, remained a challenge, down 45% from last year. Remember that as part of our cost savings initiatives, we cut user acquisition spending at GuruShot, while GuruShot 2.0 is in the planning stage. So this decline wasn't unexpected. Cost of revenue was 5.8% for the quarter. roughly flat year-over-year on an absolute basis despite the pickup in revenue. SG&A decreased by 6% to $6.3 million during the quarter. This decrease was mainly driven by our restructuring initiatives and lower marketing spend at Gurusha. we had restructuring charges of 0.6 million dollars.
Yi Tsai: related to our announced restructuring activities in late January and early February. versus no restructuring charges or asset impairments in the year-ago quarter. Gap income from operations was $0.2 million for the quarter compared to negative $0.1 million last year. Gap net income and EPS for the quarter was $0.2 million and one cent compared to $0.1 million and one cent, respectively, last year. Non-GAAP, Net Income, and EPS were $0.9 million and 6 cents compared to $0.5 million and 3 cents in the prior year. Cash flow from operations was $0.9 million, and free cash flow was $0.8 million for the quarter.
Yi Tsai: As Jonathan mentioned, cash payments related to the restructuring and the retention bonuses tied to our 2022 acquisition of Guru Shots negatively impacted free cash flow by about $1 million in aggregate. We expect these payments to materially decline in Q4 to about $600,000 and then be immaterial in FY26. which is when the full impact of our $4 million in annualized cost reduction initiatives should start to show through. Adjusted EBITDA for the quarter increased 46% to $1.2 million. Note that depreciation and amortization decreased 61% or about $350,000 compared to last year due to the impairment of capitalized software and technology development costs.
Yi Tsai: From a liquidity standpoint, we finished the quarter with $20.4 million in cash and cash equivalents, which was up 2% sequentially despite buying back 219,000 shares for about $530,000. Fiscal year to date, we have repurchased nearly 700,000 shares.
Yi Tsai: Thank you for listening to our third quarter earning call, and I look forward to speaking with you again on our year-end call in October.
Operator: Operator back to you for Q&A. We will now begin the question and answer session.
Operator: To ask a question you may press star then one on your touchtone if If you are using a speakerphone, please pick up your handset before pressing the start To roll out your question, please press star two.
Operator: At this time, we will pause momentarily to assemble our roster. Once again, please press star 1 if you have a question or a comment.
Allie Klee: comes from Allie Klee. Yes, hi, good, good job on this quarter. Definitely. So, congrats on that.
Allie Klee: Some questions. When I look at your advertising revenue that did well, and there's different pieces of that, is there a way to kind of say, like, If you had to rank the different pieces that go into that or. how you would rank the ones that had the biggest impact?
Jonathan Reich: Hi Alan, it's Jonathan. Thanks so much for the congratulations. We.
Jonathan Reich: are we pursue advertising as a comprehensive effort on our part? So it's kind of hard to answer that question with precision.
Jonathan Reich: Ed. a recurring theme is that we broadcast is that we've got an outstanding team focused on. optimizing CPMs, that is cost per thousand, the metric that is used to value our inventory.
Allie Klee: Okay. But you said that TikTok came back at some point during the quarter. Does it feel How much of the quarter, because you've had your best to advertise, your best.
Allie Klee: USA.
Allie Klee: Thank you and have a good one. I'm going to always say this wrong, ARP, MAU, you've ever put up and it was up like 33% year over year, but their support of the overall market wasn't there for the whole quarter. Could you give us a sense of how long it was there for? And are you hearing that anything about like, Because we are hearing from some other, you know, that advertising might be a little challenge, but just whatever you could tell us would be helpful.
Jonathan Reich: Well, as you recall, there was a ban of TikTok in the U.S. that was not lifted until mid-February. When it was lifted, it took a little bit more time for the numbers to come back for TikTok to get back into the market and so on and so forth. And they are and continue to be in the market, very present. I cannot, you know, venture to speak to whatever. policy decisions are made at Washington. Having said that, they continue to buy in the market and remain ever present across advertising and marketing. all of the other initiatives that they are involved.
Jonathan Reich: can't, but I'm still not understanding why. They came back, but they didn't come back for the full quarter, maybe only, you know. Remember, our quarter started February 1st. They were not in the market for the entire quarter because the ban was not lifted until mid-February. Okay, BAM is So, so, so what had happened was both Google and Apple were not availing users of or new new installs of the TikTok app and TikTok was therefore not investing marketing dollars in trying to get users to download their app. when the government reversed Ban, TikTok began to invest in user acquisition once And that has such a big.
Jonathan Reich: factor on the market. what Yeah, I can't, I can't, I can't, I can't quantify specifically how much of this is TikTok, but TikTok is obviously one of the leading... mobile apps in the market. They spend a lot of money on marketing and has time and time again proven to be a very good user acquisition platform for them. with their re-entry into the market. being that we monetize a good portion of our revenue through programmatic advertising. which is A Marketplace, Buyers and Sellers, Supply and Demand. then, you know, pricing. Having said that, I also want to underscore what we had talked about with our focus on particularly from a marketing user acquisition perspective, being on catering to.
Jonathan Reich: users in well-developed economies, those well-developed economies carry more weight in terms of the CPMs that they can bring to the table. So that was also a significant piece of the overall improvement.
Yi Tsai: Yi, do you have anything you want to add? Yeah, I mean, when they come to mind, I don't know. We added, in addition to F-lover, we added F- as our second mediation platform. And we're constantly testing different airflow and trying to get higher CPM for our inventory.
Allie Klee: I hope that answers your question. I mean, in addition to the reason why... Got it. Okay. Thank you. That's good color.
Allie Klee: Then in terms of your monthly average, monthly active users, what I mean, did we expect that to just to continue to kind of grind down or is anything what can you do to stabilize that and then grow it?
Jonathan Reich: Great question. So we are working on stabilizing it and, you know, the focus is really on the well-developed market. We have seen some I think, May to May, year over year, we were flat, and we continue to refine and optimize our user acquisition spend to bring on high-value users in those markets. We love users from all markets, but clearly we're prioritizing our focus. users that can provide a disproportionate impact. to our overall revenue stream. from the well-developed markets. To that end, we have expanded our investment in user acquisition for the Zedge marketplace. over the course of the last quarters with attractive return on ad spend users.
Jonathan Reich: And that ultimately drives more revenue for the company, even though we have lost users in. more or less well-developed or developing economies. Emerging Markets, and the like.
Allie Klee: Okay, got it.
Allie Klee: In terms of, you had written with Emojipedia is one of the things was the new feature of Emojipedia Sandbox. Could you comment on that, what that is, yeah, what you're doing there? Yeah, maybe the Emojipedia has been testing new features, such as Create Your Own Emoji with AI or some mini-emoji games. We are really focused on the upcoming release of digital stickers, which will be an adjacent vertical. And we plan that for World Emoji Day, which takes place in July. It will be our first foray into a brand new content type. which is not emoji driven.
Allie Klee: And our hope is that. based upon the similarity in terms of use of emojis and stickers that that will drive additional interest, traffic, and engagement. to the platform.
Allie Klee: Okay, great.
Allie Klee: In terms of Zedge premium, the marketplace. work... Sean O'Toole Last quarter, you talked about kind of You rewarded video usage. and you had good conversion rates. And what's any commentary on kind of the factors affecting the marketplace and GTV? this quarter. You're thinking year over year. I'm sorry, it was hard to hear. Can you repeat the question? Just commenting on your Zedge premium, how you're how you thought about how it performed and, and the many things you're working on there related. Zedge Premium continues to be a. The core part of the overall marketplace and our thought process is to continue to bring on new artists and provide them with tooling.
Jonathan Reich: that will enable revenue creation for them. The Major thing that has happened over the course of the last couple of months has been that we've also made Zedge Premium content available on web. That opens up a new channel for customers to ultimately purchase that content. So with that in mind, that will continue, that is, that investment in terms of our community will continue to be piece of this.
Jonathan Reich: And then separately, although we're not You haven't asked about it. We look at our creator community on a comprehensive basis, both in Marketplace, and in GuruShots as being a very strategic asset that we can turn to for content-on-demand needs. that come to light because of DataSiege.ai the new Business-to-Business Marketplace that we had announced last week. focusing on curating. and creating content to meet the needs of Foundational AI company. in terms of refining and tuning their respective models accordingly. Yeah, that sounds very powerful.
Allie Klee: In terms of the So for data seed. Justin.
Jonathan Reich: When do you think, I mean, you've announced a transaction, but how do you think about how this gets rolled out? So we are actively in the market. building relationships with perspective. customers. In addition to that, we have also published a research paper in conjunction with Perl.ai and Emmet Research, demonstrating that our Dataset. has advantages for automated recognition system, visual, you know, recognition system. And that is a marketing effort, clearly, to get our name out there. We've been very highly ranked on Hugging Face since we published that paper.
Jonathan Reich: and with any New B2B product for us. This is really brand new. We're now seeding the market, no pun intended, and building those relationships so that we can meet these bespoke needs. One of the problems that We have come to recognize is that many of these foundational models are not able to source. these unique needs that they have. with materiality and in a short period of time. And the promise that we bring to the table is being able to fill that.
Jonathan Reich: So clearly, if we just look at images on the guru shop side of the house. If a model has a specific need of unique content that is not something that they can readily get their hands on. we can reach out, we can launch a competition, or. even engage with our photo enthusiasts in our community in order to Hamas. volume associated with that particular.
Jonathan Reich: Of course, we can't handle every request that is on the market, but by way of example, we're not providing photographs of internal organs, which are really important for AI models and how diseases are recognized and discovered and so on and so forth. Yet there are many, many use cases. And just to mention one that. We've come across, there's a entity that's trying to build a model that will render shadows. Hathorow. That's a very complex issue. Just take as by way of example, you're sitting in your office, the curtains are open, you've got overhead lighting, power shadows.
Jonathan Reich: That's the sort of stuff that we can. generate lots and lots of images in a relatively short period of time in order to help refine that model.
Allie Klee: very interesting. Okay. Thank you.
Allie Klee: In terms of... you talked about rolling out an audio, audio AI. What would that look like? Is that like a ringtone? And when are you thinking of that coming out? I think it's somewhere near. We're going to be rolling it out on a limited basis first before the end of June. And then we will scale, and based upon iterative feedback and so on and so forth, it will be a feature within the Zedge marketplace, and just as with Jan AI imagery today, a user will essentially be able to go in and create A ringtone or a ringtone doesn't necessarily mean that it's strictly music.
Jonathan Reich: It can be a funny sound. Just by way of example, but a user will prompt and based upon their prompt. They will get the content that, or they will create the content that they have prompted. So this would be, it would be somewhat of a premium price versus Well, yeah, the business model is something where I imagine that it will somewhat available in our subscription offering and for those users that do not subscribe, or we may put up some sort of a paywall or advertising paywall, that's, that's all being worked on, you know, as Okay, but this could just help with the momentum you already have with subscription.
Jonathan Reich: Yes, that's correct. In addition to that from a timing perspective. Audio is still rather nascent in this type of consumer offering in the market. And we are hopeful that we can benefit from entering at an early point in time. which could lead to more users coming to us to engage with this new feature. That's what our, that's what we're, you know, hoping for.
Allie Klee: That's great. So just what I heard you say. One of the things you said, you think year-over-year improvement and bottom line metrics could for more visible next quarter with what you've done in the cost structure. taking into account traditional seasonality. The next quarter is a little, is it a little slower because of the summertime or?
Jonathan Reich: And could you remind us what you said about the The restructuring or the retention costs that you said will happen in fiscal fourth quarter? Sure. So for the specific numbers, I'm going to have Yi answer your question in terms of let's call it seasonality in the business. As I think you know, typically. RQ4 is a little bit later because of the summer. It's a month of May. July, our fiscal year begins on August 1st. at the same point in time. we are still. very, very focused on making sure that we're growing the business. When you say growing the business, so are you including the top line?
Jonathan Reich: Yes, that's correct. But I'll just, you know, I'll underscore, you know, the obvious has. was very clear from both these comments and my comments. Our cash flow has and will continue to be outstanding. The restructuring certainly is helping us. I think that we said that, you know, there could be up to another, like, $4 million of cash flow. Because of restructuring, the restructuring has unfolded very, very well. the fact that the Gruber shot retention bonus is almost completely behind us from a payout perspective. And the fact that we have hailed or not hailed but. cut back on.
Jonathan Reich: user acquisition spend for guru shots while we it depends around what Verschot's 2.0 will ultimately be. all of those are, you know, contributing to our improved cash. So from a cash flow perspective. I would, you know, I would underscore that we're doing really, really nicely.
Yi Tsai: Yi, you may want to get into some of the more... , there are specific numbers about the retention bonus and other . . Allen is interested.
Yi Tsai: Right, so the tail end of the restructuring charges in Q4 would be about $325,000. This is because the accounting standard, we can only expense and pay out during the retention period. So after July, it will be gone in terms of charges, but it's... Severance payment will be paid throughout the next. Yi Tsai, Derek Greenberg, Jonathan Reich, Yi Tsai, Zedge Yi Tsai, Derek Greenberg, Jonathan Reich, Yi Tsai, Zedge with their April payroll, if you will. which was about $323,000. So Q flow accounting for cash flow would be about $600,000. retention bonus and related to the second I hope that answers your question.
Allie Klee: Yes. Thank you.
Allie Klee: Okay, I'm trying to think if I think I hit most of the things I wanted. um I think those were my questions.
Allie Klee: Well, this was a very good quorum, so thank you. Thank you, Alex. Thank you.
Operator: This concludes our question and answer session and conference call. Thank you for attending today's presentation. You may now disconnect.