Q3 2026 Zedge Inc Earnings Call
Speaker #2: Good day, and welcome to Zedge's earnings conference call for the third fiscal quarter of 2026. During management's prepared remarks, all participants will be in listen-only mode.
Operator: Good day, and welcome to Zedge's earnings conference call for Q3 2026. During management's prepared remarks, all participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation by Zedge's management, there will be an opportunity to ask questions. To ask a question, please press star then one on your touch-tone phone. To withdraw your question, please press star two.
Speaker #2: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation by Zedge's management, there will be an opportunity to ask questions.
Speaker #2: To ask a question, please press star, then one on your touch-tone phone. To withdraw your question, please press star, then two. Also note that Zedge will be presenting at the Planet MicroCap Conference next Wednesday at 2:30 p.m. Eastern Time.
Operator: Also note that Zedge will be presenting at the Planet MicroCap Conference next Wednesday at 2:30 PM Eastern Time. I will now turn the call over to Brian Siegel.
Operator: Also note that Zedge will be presenting at the Planet MicroCap Conference next Wednesday at 2:30 PM Eastern Time. I will now turn the call over to Brian Siegel.
Speaker #2: I will now turn the call over to Brian Siegel. Thank you, operator. 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.
Brian Siegel: Thank you, operator. 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 remarks or in the question and answer session, whether general or specific in nature, are subject to risks and uncertainties that may cause actual results in the future to differ materially from those discussed on today's calls. These risks and uncertainties include, but are not limited to, specific risks and uncertainties disclosed in Zedge's periodic SEC filings. 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.
Brian Siegel: Thank you, operator. 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 remarks or in the question and answer session, whether general or specific in nature, are subject to risks and uncertainties that may cause actual results in the future to differ materially from those discussed on today's calls. These risks and uncertainties include, but are not limited to, specific risks and uncertainties disclosed in Zedge's periodic SEC filings. 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.
Speaker #2: Any forward-looking statements made during this conference call, during the prepared remarks or in the question-and-answer session, whether general or specific in nature, are subject to risks and uncertainties that may cause actual results in the future to differ materially from those discussed on today's call.
Speaker #2: These risks and uncertainties include, but are not limited to, specific risks and uncertainties disclosed in Zedge's periodic SEC filings. 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.
Speaker #2: 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 8-K with the SEC.
Brian Siegel: Please note that our earnings release is available on the investor relations page of the Zedge website and has also been filed on Form 8-K with the SEC. 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.
Brian Siegel: Please note that our earnings release is available on the investor relations page of the Zedge website and has also been filed on Form 8-K with the SEC. 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.
Speaker #2: 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.
Speaker #2: Now, I would like to turn the call over to Jonathan.
Speaker #3: Thank you, Brian, and good afternoon, everyone. Let me start with what stood out to me this quarter. We continued to demonstrate that the core Zedge Marketplace business is resilient.
Jonathan Reich: Thank you, Brian, and good afternoon, everyone. Let me start with what stood out to me this quarter. We continued to demonstrate that the core Zedge marketplace business is resilient. This was a GAAP profitable quarter, which I think is worth noting, and the underlying monetization trends remain strong. Subscription revenue grew 32% year over year as active subscriptions reached nearly 1.3 million, up 41%, marking nine consecutive quarters of year-over-year growth, while Zedge Premium GTV increased 17%. This contributed to our record quarterly average revenue per monthly active user of nearly $0.12. What those numbers collectively tell me is that our ongoing investment in acquiring and retaining higher-value users continues to pay off. Even though overall monthly active users declined, the quality of engagement and the revenue we generate per user improved.
Jonathan Reich: Thank you, Brian, and good afternoon, everyone. Let me start with what stood out to me this quarter. We continued to demonstrate that the core Zedge marketplace business is resilient. This was a GAAP profitable quarter, which I think is worth noting, and the underlying monetization trends remain strong. Subscription revenue grew 32% year over year as active subscriptions reached nearly 1.3 million, up 41%, marking nine consecutive quarters of year-over-year growth, while Zedge Premium GTV increased 17%. This contributed to our record quarterly average revenue per monthly active user of nearly $0.12. What those numbers collectively tell me is that our ongoing investment in acquiring and retaining higher-value users continues to pay off. Even though overall monthly active users declined, the quality of engagement and the revenue we generate per user improved.
Speaker #3: This was a GAAP-profitable quarter, which I think is worth noting, and the underlying monetization trends remain strong. Subscription revenue grew 32% year over year as active subscriptions reached nearly 1.3 million, up 41%, marking nine consecutive quarters of year-over-year growth, while Zedge Premium GTV increased 17%.
Speaker #3: This contributed to our record quarterly average revenue per monthly active user of nearly $0.12. What those numbers collectively tell me is that our ongoing investment in acquiring and retaining higher-value users continues to pay off.
Speaker #3: Even though overall monthly active users declined, the quality of engagement and the revenue we generate per user improved. Additionally, while advertising revenue declined slightly, the drop was entirely attributable to EmojiPedia, which is being managed for profitability and cash generation in light of the structural changes Google made to its search results page.
Jonathan Reich: While advertising revenue declined slightly, the drop was entirely attributable to Emojipedia, which is being managed for profitability and cash generation in light of the structural changes Google made to its search results page. Within the Zedge marketplace itself, advertising revenue was essentially flat year over year, and I would characterize that as a resilient result, particularly given that the prior year benefited from a one-time integration bonus from an ad platform partner. Within the Zedge marketplace, I want to highlight one data point that I think reinforces our message about monetization quality. iOS revenue grew 35% year over year and now represents 6.5% of total Zedge marketplace revenue, up from 5.1% a year ago. iOS users are among our highest value users, and that trend is moving in the right direction. Turning to Data Seeds, this was a meaningful quarter for the business.
Jonathan Reich: While advertising revenue declined slightly, the drop was entirely attributable to Emojipedia, which is being managed for profitability and cash generation in light of the structural changes Google made to its search results page. Within the Zedge marketplace itself, advertising revenue was essentially flat year over year, and I would characterize that as a resilient result, particularly given that the prior year benefited from a one-time integration bonus from an ad platform partner. Within the Zedge marketplace, I want to highlight one data point that I think reinforces our message about monetization quality. iOS revenue grew 35% year over year and now represents 6.5% of total Zedge marketplace revenue, up from 5.1% a year ago. iOS users are among our highest value users, and that trend is moving in the right direction. Turning to Data Seeds, this was a meaningful quarter for the business.
Speaker #3: Within the Zedge marketplace itself, advertising revenue was essentially flat year over year, and I would characterize that as a resilient result, particularly given that the prior year benefited from a one-time integration bonus from an ad platform partner.
Speaker #3: Within the Zedge marketplace, I want to highlight one data point that I think reinforces our message about monetization quality. iOS revenue grew 35% year over year and now represents 6.5% of total Zedge marketplace revenue, up from 5.1% a year ago.
Speaker #3: iOS users are among our highest-value users, and that trend is moving in the right direction. Turning to data seeds, this was a meaningful quarter for the business.
Speaker #3: We fulfilled our first six-figure order stemming from an existing customer, a leading technology company. Successfully delivering a project of this size, on spec, within tight time frames is a meaningful milestone validating our ability to secure larger, more complex orders, especially from existing customers.
Jonathan Reich: We fulfilled our first six-figure order stemming from an existing customer, a leading technology company. Successfully delivering a project of this size on spec within tight timeframes is a meaningful milestone, validating our ability to secure larger, more complex orders, especially from existing customers. At the same time, our prospect pipeline is also growing. We are generating interest from leads interested in ethically sourced images, video, and audio data sets. Our ability to tap into our deep experience in creating and operating consumer mobile apps and repurposing this knowledge for managed, crowdsourced content creation that complies with regulatory frameworks is unique. We have said consistently that revenue will remain lumpy as we mature our offering, but each successful delivery strengthens our credibility in the enterprise market, and that is what builds toward larger and more consistent deal flow over time.
Jonathan Reich: We fulfilled our first six-figure order stemming from an existing customer, a leading technology company. Successfully delivering a project of this size on spec within tight timeframes is a meaningful milestone, validating our ability to secure larger, more complex orders, especially from existing customers. At the same time, our prospect pipeline is also growing. We are generating interest from leads interested in ethically sourced images, video, and audio data sets. Our ability to tap into our deep experience in creating and operating consumer mobile apps and repurposing this knowledge for managed, crowdsourced content creation that complies with regulatory frameworks is unique. We have said consistently that revenue will remain lumpy as we mature our offering, but each successful delivery strengthens our credibility in the enterprise market, and that is what builds toward larger and more consistent deal flow over time.
Speaker #3: At the same time, our prospect pipeline is also growing. We are generating interest from leads interested in ethically sourced images, video, and audio datasets.
Speaker #3: Our ability to tap into our deep experience in creating and operating consumer mobile apps, and repurpose this knowledge for managed, crowdsourced content creation that complies with regulatory frameworks, is unique.
Speaker #3: We have said consistently that revenue will remain lumpy as we mature our offering, but each successful delivery strengthens our credibility in the enterprise market, and that is what builds toward larger and more consistent deal flow over time.
Speaker #3: Turning to Tapedeck, our marketplace for independent music, where artists earn royalties directly from their fans. We have been focusing on expanding the music catalog, and I am excited to share that we recently signed Sync Music, Tuff Gong Distribution, and the BWL Entertainment catalog.
Jonathan Reich: Turning to Tapedeck, our marketplace for independent music, where artists earn royalties directly from their fans. We have been focusing on expanding the music catalog, and I am excited to share that we recently signed Sync Music, Tuff Gong Distribution, and the BWL Entertainment catalog. Sync's roster includes artists like Jason Derulo and T.I. Tuff Gong was originally established by Bob and Rita Marley as a home for their own music and fellow independent artists. BWL manages the estate of Betty Wright, a soul pioneer and the first woman to have a gold LP on an independent label. These are exactly the types of artists Tapedeck was designed to serve, and this progress increases our confidence in the direction of the catalog. Next, our product innovation team released an additional two alpha products this quarter.
Jonathan Reich: Turning to Tapedeck, our marketplace for independent music, where artists earn royalties directly from their fans. We have been focusing on expanding the music catalog, and I am excited to share that we recently signed Sync Music, Tuff Gong Distribution, and the BWL Entertainment catalog. Sync's roster includes artists like Jason Derulo and T.I. Tuff Gong was originally established by Bob and Rita Marley as a home for their own music and fellow independent artists. BWL manages the estate of Betty Wright, a soul pioneer and the first woman to have a gold LP on an independent label. These are exactly the types of artists Tapedeck was designed to serve, and this progress increases our confidence in the direction of the catalog. Next, our product innovation team released an additional two alpha products this quarter.
Speaker #3: Sync's roster includes artists like Jason Derulo and T.I. Tuff Gong was originally established by Bob and Rita Marley as a home for their own music and for fellow independent artists.
Speaker #3: And BWL manages the estate of Betty Wright, a true pioneer and the first woman to have a gold LP on an independent label. These are exactly the types of artists Tape Deck was designed to serve, and this progress increases our confidence in the direction of the catalog.
Speaker #3: Next, our product innovation team released an additional two alpha products this quarter. We now have four live and remain on track to achieve our goal of six alpha launches this fiscal year.
Jonathan Reich: We now have four live and remain on track to achieve our goal of six alpha launches this fiscal year. That will be zero to six in less than 12 months. What I want to emphasize about our framework is that it is designed to be highly efficient at scaling winners and killing losers. We pre-validate before writing code, build fast, measure against clear KPIs, invest in the winners, and cut the losers. Each new launch compounds from prior releases by utilizing some of the development work, which shortens our time to market with every iteration. We are attached to the framework, not to any single product. That discipline is what allows us to take multiple shots on goal without putting meaningful pressure on the balance sheet. From a financial standpoint, free cash flow increased 55% year over year to $1.2 million and is up 10% year to date.
Jonathan Reich: We now have four live and remain on track to achieve our goal of six alpha launches this fiscal year. That will be zero to six in less than 12 months. What I want to emphasize about our framework is that it is designed to be highly efficient at scaling winners and killing losers. We pre-validate before writing code, build fast, measure against clear KPIs, invest in the winners, and cut the losers. Each new launch compounds from prior releases by utilizing some of the development work, which shortens our time to market with every iteration. We are attached to the framework, not to any single product. That discipline is what allows us to take multiple shots on goal without putting meaningful pressure on the balance sheet. From a financial standpoint, free cash flow increased 55% year over year to $1.2 million and is up 10% year to date.
Speaker #3: That will be zero to six in less than 12 months. What I want to emphasize about our framework is that it is designed to be highly lossy.
Speaker #3: We pre-validate before writing code, build fast, and measure against clear KPIs. We invest in the winners and cut the losers. Each new launch compounds from prior releases by utilizing some of the development work, which shortens our time to market with every iteration.
Speaker #3: We are attached to the framework, not to any single product. That discipline is what allows us to take multiple shots on goal without putting meaningful pressure on the balance sheet.
Speaker #3: From a financial standpoint, free cash flow increased 55% year over year to $1.2 million and is up 10% year to date. Cash and cash equivalents strengthened to $19.7 million.
Jonathan Reich: Cash and cash equivalents strengthened to $19.7 million, and we continue to carry no debt. During the quarter, we increased our quarterly dividend by 25% to $0.02 per share, reflecting our confidence in the business and our ongoing free cash flow generation. We also opportunistically repurchased shares when market conditions warranted and continued to invest in DataSeeds and our innovation pipeline. All capital allocation priorities are being pursued concurrently, and none of them is coming at the expense of the others or of the balance sheet. Stepping back, our priorities for the remainder of fiscal 2026 are straightforward: continue strengthening monetization in the Zedge Marketplace, build DataSeeds deliberately, and execute well on the opportunities we elect to pursue and advance our innovation pipeline in a disciplined way. With that, I will turn it over to Yi.
Jonathan Reich: Cash and cash equivalents strengthened to $19.7 million, and we continue to carry no debt. During the quarter, we increased our quarterly dividend by 25% to $0.02 per share, reflecting our confidence in the business and our ongoing free cash flow generation. We also opportunistically repurchased shares when market conditions warranted and continued to invest in DataSeeds and our innovation pipeline. All capital allocation priorities are being pursued concurrently, and none of them is coming at the expense of the others or of the balance sheet. Stepping back, our priorities for the remainder of fiscal 2026 are straightforward: continue strengthening monetization in the Zedge Marketplace, build DataSeeds deliberately, and execute well on the opportunities we elect to pursue and advance our innovation pipeline in a disciplined way. With that, I will turn it over to Yi.
Speaker #3: And we continue to carry no debt. During the quarter, we increased our quarterly dividend by 25% to $0.02 per share, reflecting our confidence in the business and our ongoing free cash flow generation.
Speaker #3: We also opportunistically repurchased shares when market conditions warranted, and continued to invest in data seeds and our innovation pipeline. All capital allocation priorities are being pursued concurrently, and none of them is coming at the expense of the others or of the balance sheet.
Speaker #3: Stepping back, our priorities for the remainder of fiscal 2026 are straightforward: continue strengthening monetization in the Zedge Marketplace, build data seeds deliberately, execute well on the opportunities we elect to pursue, and advance our innovation pipeline in a disciplined way.
Speaker #3: With that, I will turn it over to E.
Speaker #1: Thank you, Jonathan. Total revenue for the third quarter was $8.0 million, up 3.0% from last year. Remember, historically, Q3 is our seasonally weakest quarter.
Yi Tsai: Thank you, Jonathan. Total revenue for Q3 was $8.9 million, up 3.0% from last year. Remember, historically, Q3 is our seasonally weakest quarter. There are a couple of items of note in the quarter. Consistent with Jonathan's comments, Emojipedia was a drag on overall top-line growth rate. That said, Zedge Marketplace revenue continued to perform well. Given last year, our advertising revenue benefited from a one-time $450,000 bonus from an ad partner. As a result of these two items, advertising revenue was down 4.0% for the quarter. Zedge Plus subscription revenue increased 31.9% year over year, and our net active subscriber base grew 40.6%, reaching nearly 1.3 million subscribers. We continue to optimize our subscription plans and are seeing the benefit of those changes. Deferred revenue, which primarily represents subscription-related revenue, reached $6.2 million, up 26% year over year.
Yi Tsai: Thank you, Jonathan. Total revenue for Q3 was $8.9 million, up 3.0% from last year. Remember, historically, Q3 is our seasonally weakest quarter. There are a couple of items of note in the quarter. Consistent with Jonathan's comments, Emojipedia was a drag on overall top-line growth rate. That said, Zedge Marketplace revenue continued to perform well. Given last year, our advertising revenue benefited from a one-time $450,000 bonus from an ad partner. As a result of these two items, advertising revenue was down 4.0% for the quarter. Zedge Plus subscription revenue increased 31.9% year over year, and our net active subscriber base grew 40.6%, reaching nearly 1.3 million subscribers. We continue to optimize our subscription plans and are seeing the benefit of those changes. Deferred revenue, which primarily represents subscription-related revenue, reached $6.2 million, up 26% year over year.
Speaker #1: There are a couple of items of note in the quarter. Consistent with Jonathan's comments, Emojipedia was a drag on the overall top-line growth rate. That said, Zedge Marketplace revenue continued to perform well.
Speaker #1: Last year, our advertising revenue benefited from a one-time $450,000 bonus from an ad partner. As a result of these two items, advertising revenue was down 4.0% for the quarter.
Speaker #1: Zedge Plus subscription revenue increased 31.9% year over year, and our net active subscriber base grew 40.6%, reaching nearly 1.3 million subscribers. We continue to optimize our subscription plans and are seeing the benefits of those changes.
Speaker #1: Deferred revenue, which primarily represents subscription-related revenue, reached $6.2 million—up 26% year over year. This is an important metric, as it reflects future revenue that essentially carries a 100% gross margin.
Yi Tsai: This is an important metric as it reflects future revenue that essentially carries a 100% gross margin. Zedge Premium GTV was up 16.6% from the year ago quarter, and ARPMAU increased 21.2% to $0.119, continuing the shift toward higher value users and improved monetization efficiency. Regarding digital goods and services revenue, this line includes contribution from both GuruShots and DataSeeds, with the majority still being generated by GuruShots at this stage. Although this quarter, DataSeeds benefited from the fulfillment of the six-figure order Jonathan mentioned. SG&A was $6.2 million for the quarter, down 1.7% from last year. GAAP operating income was $1.1 million compared to $0.2 million last year. GAAP net income and diluted EPS were $0.9 million and $0.07 compared to $0.2 million and $0.01 respectively.
Yi Tsai: This is an important metric as it reflects future revenue that essentially carries a 100% gross margin. Zedge Premium GTV was up 16.6% from the year ago quarter, and ARPMAU increased 21.2% to $0.119, continuing the shift toward higher value users and improved monetization efficiency. Regarding digital goods and services revenue, this line includes contribution from both GuruShots and DataSeeds, with the majority still being generated by GuruShots at this stage. Although this quarter, DataSeeds benefited from the fulfillment of the six-figure order Jonathan mentioned. SG&A was $6.2 million for the quarter, down 1.7% from last year. GAAP operating income was $1.1 million compared to $0.2 million last year. GAAP net income and diluted EPS were $0.9 million and $0.07 compared to $0.2 million and $0.01 respectively.
Speaker #1: Zedge Premium GTV was up 16.6% from the year-ago quarter and has now increased 21.2% to 11.9 cents. Continuing the shift toward higher-value users and improved monetization efficiency—regarding digital goods and services revenue, this line includes contributions from both GuruShots and DataSeeds.
Speaker #1: With the majority still being generated by GuruShots at this stage, although this quarter data seeds benefited from the fulfillment of the six-figure order Jonathan mentioned.
Speaker #1: SG&A was $6.2 million for the quarter, down 1.7% from last year. GAAP operating income was $1.1 million, compared to $0.2 million last year. GAAP net income and diluted EPS were $0.9 million and $0.07, respectively.
Speaker #1: Compared to $0.2 million and 1 cent, respectively. On a non-GAAP basis, net income was $1.0 million, and EPS was 7 cents, compared to $0.9 million and 6 cents, respectively.
Yi Tsai: On a non-GAAP basis, net income was $1.0 million and EPS was $0.07 compared to $0.9 million and $0.06 respectively. Free cash flow was $1.2 million for the quarter, up 55% from last year. Adjusted EBITDA was $1.3 million, up 1% from last year. From a liquidity perspective, we ended the quarter with $19.7 million in cash and cash equivalents and no debt. After Q3's end, our board added $2 million to our existing $5 million share repurchase authorization, which now has a total available capacity of approximately $2.2 million. To date, we've repurchased about 1.5 million shares for roughly $4.8 million on the existing authorization. Thank you for listening to our Q3 earning call. We look forward to updating you again when we report results for Q4 of fiscal 2026. Operator, please open the line for questions.
Yi Tsai: On a non-GAAP basis, net income was $1.0 million and EPS was $0.07 compared to $0.9 million and $0.06 respectively. Free cash flow was $1.2 million for the quarter, up 55% from last year. Adjusted EBITDA was $1.3 million, up 1% from last year. From a liquidity perspective, we ended the quarter with $19.7 million in cash and cash equivalents and no debt. After Q3's end, our board added $2 million to our existing $5 million share repurchase authorization, which now has a total available capacity of approximately $2.2 million. To date, we've repurchased about 1.5 million shares for roughly $4.8 million on the existing authorization. Thank you for listening to our Q3 earning call. We look forward to updating you again when we report results for Q4 of fiscal 2026. Operator, please open the line for questions.
Speaker #1: Free cash flow was $1.2 million for the quarter, up 55% from last year. Adjusted EBITDA was $1.3 million, up 1% from last year. From a liquidity perspective, we ended the quarter with $19.7 million in cash and cash equivalents, and no debt.
Speaker #1: After quarter's end, our board added $2 million to our existing $5 million share repurchase authorization, which now has a total available capacity of approximately $2.2 million.
Speaker #1: To date, we've repurchased about 1.5 million shares for roughly $4.8 million under the existing authorization. Thank you for listening to our third quarter earnings call.
Speaker #1: We look forward to updating you again when we report results for the fourth quarter of fiscal 2026. Operator, please open the line for questions.
Speaker #2: We will now begin the question-and-answer session. To ask a question, you may press Start, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the Start keys.
Operator: 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. To withdraw your question, please press star two. At this time, we will pause momentarily to assemble our roster. First question comes from Derek Greenberg with Maxim Group. Please proceed.
Operator: 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. To withdraw your question, please press star two. At this time, we will pause momentarily to assemble our roster. First question comes from Derek Greenberg with Maxim Group. Please proceed.
Speaker #2: To withdraw your question, please press *star* 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Derek Greenberg.
Speaker #2: With Maxim Group, please proceed.
Speaker #3: Hi, thanks for taking my questions. My first is just on data seeds, and I wanted to revisit something you had called out as a priority, which was to build that part of the business deliberately.
Derek Greenberg: Hi. Thanks for taking my questions. My first is just on DataSeeds.AI. I wanted to revisit something you'd called out as a priority, which was to build that part of the business deliberately. I was wondering if maybe you could just expand upon this and talk about what that looks like, as well as maybe an update on some of the initiatives from the last call, such as building out the inbound and outbound, as well as an off-the-shelf catalog.
Derek Greenberg: Hi. Thanks for taking my questions. My first is just on DataSeeds.AI. I wanted to revisit something you'd called out as a priority, which was to build that part of the business deliberately. I was wondering if maybe you could just expand upon this and talk about what that looks like, as well as maybe an update on some of the initiatives from the last call, such as building out the inbound and outbound, as well as an off-the-shelf catalog.
Speaker #3: I was wondering if maybe you could just expand upon this and talk about what that looks like, as well as maybe provide an update on some of the initiatives from the last call, such as building out the inbound and outbound efforts, as well as developing an off-the-shelf catalog.
Speaker #4: Hi, Derek. Thanks so much for the question. So, as you know, Data Seeds is a B2B offering that provides multimodal—that is, audio, video, and image—datasets to frontier model developers.
Jonathan Reich: Well, Derek, thanks so much for the question. As you know, DataSeeds.AI is a B2B offering that provides multimodal, that is audio, video, and image data sets to frontier model developers. We have several things going on with DataSeeds.AI. In terms of pipeline, we have been developing our thesis around what is known as managed crowd content creation, where we are able to turn to our creator community, which is available through both the Zedge marketplace, as well as the GuruShots players, and have them create content based upon the briefs that we receive from prospective customers. With respect to the pipeline itself, we have been focused more heavily on working with aggregators as opposed to working through marketplaces.
Jonathan Reich: Well, Derek, thanks so much for the question. As you know, DataSeeds.AI is a B2B offering that provides multimodal, that is audio, video, and image data sets to frontier model developers. We have several things going on with DataSeeds.AI. In terms of pipeline, we have been developing our thesis around what is known as managed crowd content creation, where we are able to turn to our creator community, which is available through both the Zedge marketplace, as well as the GuruShots players, and have them create content based upon the briefs that we receive from prospective customers. With respect to the pipeline itself, we have been focused more heavily on working with aggregators as opposed to working through marketplaces.
Speaker #4: And we have several things going on with data seeds. In terms of pipeline, we have been developing our thesis around what is known as managed crowd content creation, where we are able to turn to our creator community, which is available through both the Zedge Marketplace as well as the GuruShots players.
Speaker #4: And have them create content based upon the brief that we receive from prospective customers. With respect to the pipeline itself, we have been focused more heavily on working with aggregators, as opposed to working through marketplaces.
Speaker #4: We find that the aggregators seem to have higher-quality leads, and developing those relationships in a fashion where the aggregators understand our offering—how we differentiate, our ability to scale production according to plan, and so on and so forth—has been a major focus of ours.
Jonathan Reich: We find that the aggregators seem to have higher quality leads, and developing those relationships in a fashion where the aggregators understand our offering, how we differentiate our ability to scale production according to plan and so on and so forth, has been a major focus of ours. In terms of differentiating between inbound and outbound, we have been focusing more heavily on outbound, which is not only electronic outbound, but participating in conferences. By way of example, there's a very well-established computer vision conference that had taken place in Denver, CVPR, last week. I attended the conference and met with multiple prospects and ecosystem partners in order to further existing relationships as well as develop new relationships. That has resulted in our becoming more visible to prospects that are interested in multimodal datasets.
Jonathan Reich: We find that the aggregators seem to have higher quality leads, and developing those relationships in a fashion where the aggregators understand our offering, how we differentiate our ability to scale production according to plan and so on and so forth, has been a major focus of ours. In terms of differentiating between inbound and outbound, we have been focusing more heavily on outbound, which is not only electronic outbound, but participating in conferences. By way of example, there's a very well-established computer vision conference that had taken place in Denver, CVPR, last week. I attended the conference and met with multiple prospects and ecosystem partners in order to further existing relationships as well as develop new relationships. That has resulted in our becoming more visible to prospects that are interested in multimodal datasets.
Speaker #4: In terms of differentiating between inbound and outbound, we have been focusing more heavily on outbound, which is not only electronic outbound, but also participating in conferences. By way of example, there is a very well-established computer vision conference that took place in Denver, CVPR, last week.
Speaker #4: I attended the conference and met with multiple prospects and ecosystem partners in order to further existing relationships as well as develop new relationships. That has resulted in our becoming more visible to prospects who are interested in multimodal data sets.
Speaker #4: And finally, there is another piece of this, not related to sales per se, but related to the product, which is all of the technology layered around everything having to do with ensuring that the quality of the content that we are providing has been vetted through technology so that acceptance rates are high, ensuring that the metadata associated with the content complies with the customer's specifications, naming conventions, and a whole set of other requirements that allow for the data to be accepted with a high acceptance rate.
Jonathan Reich: Finally, there is another piece of this, not related to sales per se, but related to the product, which is all of the technology layered around everything having to do with ensuring that the quality of the content that we are providing has been embedded through technology so that acceptance rates are high, ensuring that the metadata associated with the content complies with the customer's specifications, naming conventions, and a whole set of other requirements that allow for the data to be accepted with a high acceptance rate. I hope that answers your question.
Jonathan Reich: Finally, there is another piece of this, not related to sales per se, but related to the product, which is all of the technology layered around everything having to do with ensuring that the quality of the content that we are providing has been embedded through technology so that acceptance rates are high, ensuring that the metadata associated with the content complies with the customer's specifications, naming conventions, and a whole set of other requirements that allow for the data to be accepted with a high acceptance rate. I hope that answers your question.
Speaker #4: I hope that answers your question.
Speaker #3: Yes, that's super helpful. And then I was wondering—obviously, you had mentioned the deals are lumpy, not a kind of visibility right now—but I was wondering if we could perhaps get a little bit more color in terms of the pipeline, the magnitude of the pipeline, or just in terms of how to think about the frequency of potential deals as we go forward, maybe annually or quarterly, or how you think about that.
Derek Greenberg: Yes, that was super helpful. Then I was wondering, obviously, you had mentioned the deals are lumpy, not a ton of visibility right now, but I was wondering if we could perhaps get a little bit more color in terms of the pipeline, the magnitude of the pipeline, or just in terms of how to think about the frequency of potential deals as we go forward, maybe annually, or quarterly, or how you think about that.
Derek Greenberg: Yes, that was super helpful. Then I was wondering, obviously, you had mentioned the deals are lumpy, not a ton of visibility right now, but I was wondering if we could perhaps get a little bit more color in terms of the pipeline, the magnitude of the pipeline, or just in terms of how to think about the frequency of potential deals as we go forward, maybe annually, or quarterly, or how you think about that.
Speaker #4: Yeah, let me say, obviously, I think we are not at the point where we can project revenue with certainty. Having said that, we have seen more prospects in the pipeline.
Jonathan Reich: Yeah. Let me say, obviously, I think, we are not at the point where we can project revenue with certainty. Having said that, we have seen more prospects in the pipeline spanning all modalities. The unique value proposition that we bring to the table is the fact that we are able to provide a managed crowd solution. The ability for us to benefit from our experience in the mobile app space, which spans everything from onboarding to ensuring that the content that is being created complies with a brief, ensuring that there is regulatory compliance, and that means everything from privacy to ensuring that if there are humans in a particular brief, that there's model release, biometric information, and that there is compliance with laws around biometrics and so on and so forth.
Jonathan Reich: Yeah. Let me say, obviously, I think, we are not at the point where we can project revenue with certainty. Having said that, we have seen more prospects in the pipeline spanning all modalities. The unique value proposition that we bring to the table is the fact that we are able to provide a managed crowd solution. The ability for us to benefit from our experience in the mobile app space, which spans everything from onboarding to ensuring that the content that is being created complies with a brief, ensuring that there is regulatory compliance, and that means everything from privacy to ensuring that if there are humans in a particular brief, that there's model release, biometric information, and that there is compliance with laws around biometrics and so on and so forth.
Speaker #4: Spanning all modalities, the unique value proposition that we bring to the table is the fact that we are able to provide a managed crowd solution. The ability for us to benefit from our experience in the mobile app space, which spans everything from onboarding to ensuring that the content that is being created complies with a brief, ensuring that there is regulatory compliance—and that means everything from privacy to ensuring that if there are humans in a particular brief, that there is model release, biometric information, that there is compliance with laws around biometrics, and so on and so forth—that being just organically built into the product, coupled with a reward mechanism and the payment mechanism, is something which really stands out and is capturing the attention of prospective customers.
Jonathan Reich: That being just organically built into the product, coupled with a reward mechanism and a payment mechanism, is something which really stands out and is capturing the attention of prospective customers. That has been a major focus of ours over the course of the last quarter, and we have had success in fulfilling both proof of concepts as well as orders with the maturation of our offering. If you were to rewind two, three quarters ago, the precision by which we described how we were acquiring data has come a long way. Going back to what you had said earlier about asking about off-the-shelf and growing our catalog, we have focused less on off-the-shelf content because what we are seeing in the marketplace is that models need pre- and post-training based upon new data that doesn't exist.
Jonathan Reich: That being just organically built into the product, coupled with a reward mechanism and a payment mechanism, is something which really stands out and is capturing the attention of prospective customers. That has been a major focus of ours over the course of the last quarter, and we have had success in fulfilling both proof of concepts as well as orders with the maturation of our offering. If you were to rewind two, three quarters ago, the precision by which we described how we were acquiring data has come a long way. Going back to what you had said earlier about asking about off-the-shelf and growing our catalog, we have focused less on off-the-shelf content because what we are seeing in the marketplace is that models need pre- and post-training based upon new data that doesn't exist.
Speaker #4: So that has been a major focus of ours over the course of the last quarter. And we have had success in fulfilling both proof of concepts, as well as orders, with the maturation of our offering.
Speaker #4: So, if you were to rewind two or three quarters ago, the precision by which we described how we were acquiring data has come a long way.
Speaker #4: And going back to what you said earlier about asking about off-the-shelf and growing our catalog, we have focused less on off-the-shelf content because what we are seeing in the marketplace is that models need pre- and post-training based on new data that doesn't exist.
Speaker #4: And our ability to go out and create those data sets at scale with compliance, ensuring that they are ethically sourced, and that they can be delivered at scale is the direction that we are focusing on in terms of building out this portion of the business.
Jonathan Reich: Our ability to go out and create those data sets at scale with compliance, ensuring that they are ethically sourced and that they can be delivered at scale is the direction that we are focusing on in terms of building out this portion of the business.
Jonathan Reich: Our ability to go out and create those data sets at scale with compliance, ensuring that they are ethically sourced and that they can be delivered at scale is the direction that we are focusing on in terms of building out this portion of the business.
Speaker #3: Okay, that makes a lot of sense. I want to turn to TapeDeck, and it sounds like you've made a lot of good progress there.
Derek Greenberg: Okay. That makes a lot of sense. I want to turn to Tapedeck, and it sounds like you've made a lot of good progress there with all the deals you've announced. I was wondering maybe if you could just talk a little bit about how those distribution agreements with the distributors, how those are structured and work, as well as just a general update, I guess, on where your priorities lie now, if it's continuing to build out the catalog or if you're thinking about maybe user acquisition or distribution out there.
Derek Greenberg: Okay. That makes a lot of sense. I want to turn to Tapedeck, and it sounds like you've made a lot of good progress there with all the deals you've announced. I was wondering maybe if you could just talk a little bit about how those distribution agreements with the distributors, how those are structured and work, as well as just a general update, I guess, on where your priorities lie now, if it's continuing to build out the catalog or if you're thinking about maybe user acquisition or distribution out there.
Speaker #3: With all the deals you've announced, I was wondering if you could just talk a little bit about how those agreements with the distributors are structured and how they work, as well as just give a general update on where your priorities lie now—if it's continuing to build out the catalog or if you're thinking about maybe user acquisition, or just your thoughts there.
Speaker #4: Sure. So most of the effort has been around building out the catalog, as well as focusing on potential technology enhancements that will make Tape Deck more attractive to indie artists, because of the ability to not only earn money, but also ease the burden that an indie artist has in terms of launching their music and gaining a broader following.
Jonathan Reich: Sure. Most of the effort has been around building out catalog as well as focusing on potential technology enhancements that will make Tapedeck more attractive to indie artists because of the ability to not only earn more money, but also ease the burden that an indie artist has in terms of launching their music and gaining a broader following. In terms of the deals, these deals are deals where, generally speaking, we're working with indie labels, if you will, that are very much in support of the vision that we have, where you can have indie artists get paid for every listen that any piece that they have in their catalog results in. As opposed to platforms like Spotify, where many artists don't get paid, start getting paid until after there have been, let's say, 1,000 or more listens.
Jonathan Reich: Sure. Most of the effort has been around building out catalog as well as focusing on potential technology enhancements that will make Tapedeck more attractive to indie artists because of the ability to not only earn more money, but also ease the burden that an indie artist has in terms of launching their music and gaining a broader following. In terms of the deals, these deals are deals where, generally speaking, we're working with indie labels, if you will, that are very much in support of the vision that we have, where you can have indie artists get paid for every listen that any piece that they have in their catalog results in. As opposed to platforms like Spotify, where many artists don't get paid, start getting paid until after there have been, let's say, 1,000 or more listens.
Speaker #4: In terms of the deals, these deals are deals where the generally speaking, we're working with indie labels, if you will, that are very, very much in support of the vision that we have, where you can have indie artists get paid for every listen that any piece of that they have in their catalog, results in, as opposed to platforms like Spotify, where many artists do not or artists don't get paid to start getting paid until after there have been let's say 1,000 or more listens.
Speaker #4: Additionally, how they are paid is not necessarily transparent, and the rate at which they are paid is also not as transparent as it needs to be.
Jonathan Reich: How they are paid is not necessarily transparent, and the rate at which they are paid is also not as transparent as it needs to be. Our minimum is saying, "Hey, there's a floor of $0.01 per listen," but the notion of Tapedeck is really reaching out to, let's call it above average fans or hyper fans that really want to support their particular artists, their particular genres, and almost serve as a patron to those artists so that they can thrive and continue to make a living with their art form.
Jonathan Reich: How they are paid is not necessarily transparent, and the rate at which they are paid is also not as transparent as it needs to be. Our minimum is saying, "Hey, there's a floor of $0.01 per listen," but the notion of Tapedeck is really reaching out to, let's call it above average fans or hyper fans that really want to support their particular artists, their particular genres, and almost serve as a patron to those artists so that they can thrive and continue to make a living with their art form.
Speaker #4: Our minimum is saying, "Hey, there's a floor of a penny per listen." But the notion of Tape Deck is really reaching out to, let's call it, above-average fans or hyper-fans that really want to support their particular artists, their particular genres, and almost serve as a patron to those artists so that they can thrive and continue to make a living with their art form.
Speaker #3: Okay, that's really interesting. I wanted to turn now to the AI innovation—the Alpha apps you've been launching. You mentioned you have four live now.
Derek Greenberg: Good. That's really interesting. I wanted to turn now to the AI innovation that the alpha apps you've been launching. You mentioned you have four live now. I was wondering if you're seeing any traction or results from earlier launches, or just any color you can provide in terms of the potential for these launches.
Derek Greenberg: Good. That's really interesting. I wanted to turn now to the AI innovation that the alpha apps you've been launching. You mentioned you have four live now. I was wondering if you're seeing any traction or results from earlier launches, or just any color you can provide in terms of the potential for these launches.
Speaker #3: I was wondering if you're seeing any traction or results from earlier launches, or just any color you can provide in terms of the potential for these launches?
Speaker #4: Sure. So let me structurally talk about the harness. We're spinning up new products before we actually launch a product. We've done marketability testing to understand what the demand would be for the product, what the conversion rate would be, and how much we feel it would cost to acquire a user.
Jonathan Reich: Sure. Let me structurally talk about the harness. We're spinning up new products. Before we actually launch a product, we've done marketability testing to understand what the demand would be for the product, what the conversion rate would be, how much we feel it would cost to acquire a user. Going into that process, we have a set of ideas. We do some test marketing, and many of the ideas never make it past the test marketing phase. For the ones that do make it past the test marketing phase, what we have been doing is we have been building this harness which centralizes many attributes and functions associated with every new app that we roll out, and that will translate into an accelerated timeframe for us to release new apps. In terms of specifics, we had announced SynCat. SynCat was launched.
Jonathan Reich: Sure. Let me structurally talk about the harness. We're spinning up new products. Before we actually launch a product, we've done marketability testing to understand what the demand would be for the product, what the conversion rate would be, how much we feel it would cost to acquire a user. Going into that process, we have a set of ideas. We do some test marketing, and many of the ideas never make it past the test marketing phase. For the ones that do make it past the test marketing phase, what we have been doing is we have been building this harness which centralizes many attributes and functions associated with every new app that we roll out, and that will translate into an accelerated timeframe for us to release new apps. In terms of specifics, we had announced SynCat. SynCat was launched.
Speaker #4: And going into that process, we have a set of ideas. We do some test marketing, and many of the ideas never make it past the test marketing phase.
Speaker #4: For the ones that do make it past the test marketing phase, what we have been doing is building this harness, which centralizes many attributes and functions associated with every new app that we roll out.
Speaker #4: And that will translate into an accelerated timeframe for us to release new apps. In terms of specifics, we had announced SimCat was launched. It did not ultimately pass the thresholds that we had set in terms of revenue KPIs, engagement KPIs, and so on and so forth.
Jonathan Reich: It did not ultimately pass the thresholds that we had set in terms of revenue KPIs, engagement KPIs, and so on and so forth. With respect to the other three apps that are out there, they're all early-stage, of course. There's one which is trending in the right direction. The other two are too early in the pipeline to opine as to whether or not they're going to make it. Our expectation going into this sets the KPIs up. If the app is crossing the threshold, continue to evolve those KPIs. Through that gating process, we're able to separate the wheat from the chaff, if you will. The chaff is something that we will get rid of very quickly, whereas we will continue to invest in the wheat in order to see to it that we can make this a sizable portion of our business.
Jonathan Reich: It did not ultimately pass the thresholds that we had set in terms of revenue KPIs, engagement KPIs, and so on and so forth. With respect to the other three apps that are out there, they're all early-stage, of course. There's one which is trending in the right direction. The other two are too early in the pipeline to opine as to whether or not they're going to make it. Our expectation going into this sets the KPIs up. If the app is crossing the threshold, continue to evolve those KPIs. Through that gating process, we're able to separate the wheat from the chaff, if you will. The chaff is something that we will get rid of very quickly, whereas we will continue to invest in the wheat in order to see to it that we can make this a sizable portion of our business.
Speaker #4: And with respect to the other three apps that are out there, they're all early stage, of course. There's one which is trending in the right direction.
Speaker #4: The other two are too early in the pipeline to opine as to whether or not they're going to make it. Our expectation going into this is, since the KPI is up, if the app is crossing the threshold, then we continue to evolve those KPIs. Through that gating process, we're able to separate the wheat from the chaff, if you will.
Speaker #4: And the chaff is something that we will get rid of very quickly, whereas we will continue to invest in the wheat in order to see to it that we can make this a sizable portion of our business.
Speaker #4: I just say, consistently, Rovio's Angry Birds game did not become successful until Rovio had failed at 50 earlier apps. So, by and large, most of these are not going to make it to, let's call it, mainstream scalability.
Jonathan Reich: I just say consistently, Rovio's Angry Birds game did not become successful until Rovio had failed at 50 earlier apps. By and large, most of these are not going to make it to, let's call it mainstream scalable. Our responsibility and our focus is to see to it that we are managing this in a fashion where we're investing our resources responsibly. When we identify an opportunity that is delivering the performance that will ensure that it can scale to double down and continue to invest, and iterate, and develop so that we can have a brand-new revenue stream in our business.
Jonathan Reich: I just say consistently, Rovio's Angry Birds game did not become successful until Rovio had failed at 50 earlier apps. By and large, most of these are not going to make it to, let's call it mainstream scalable. Our responsibility and our focus is to see to it that we are managing this in a fashion where we're investing our resources responsibly. When we identify an opportunity that is delivering the performance that will ensure that it can scale to double down and continue to invest, and iterate, and develop so that we can have a brand-new revenue stream in our business.
Speaker #4: Our responsibility and our focus is to see to it that we are managing this in a fashion where we're investing our resources responsibly. Then, when we identify an opportunity that is delivering the performance that will ensure it can scale, we double down and continue to invest in, iterate, and develop so that we can have a brand new revenue stream in our business.
Speaker #3: Okay, got it. Thank you, that's helpful. My last question is just on MAUs. I know on the last call, you kind of called out three separate buckets of initiatives that you were trying to implement to try and stabilize and improve MAUs.
Derek Greenberg: Okay. Got it. Thank you. That's helpful. My last question is just on MAUs. I know on the last call, you called out three separate buckets of initiatives that you were trying to implement to try and stabilize and improve MAUs between marketing, new product features, and data science. I was wondering maybe if you could just talk about how those efforts are going.
Derek Greenberg: Okay. Got it. Thank you. That's helpful. My last question is just on MAUs. I know on the last call, you called out three separate buckets of initiatives that you were trying to implement to try and stabilize and improve MAUs between marketing, new product features, and data science. I was wondering maybe if you could just talk about how those efforts are going.
Speaker #3: Between marketing, new product features, and data science, I was wondering if you could just talk about how those efforts are going.
Speaker #4: Sure. So, we continue to invest in all three of those. And if I were to describe our monthly active user base, generally speaking, the quality of our user base is better than it was a year ago.
Jonathan Reich: Sure. We continue to invest in all three of those. If I were to describe our monthly active user base, generally speaking, the quality of our user base is better than it was a year ago. We are still iterating to not only see to it that the quality is there, but also to see to it that there is a growth opportunity in that domain, specifically focusing on the well-developed markets where CPMs and disposable income are more accessible. I would conclude by saying growth and the initiatives that we have to unlock that growth is not a static one-time event. It is dynamic. There's not a day that goes by where the team is not exploring new opportunities to unlock growth opportunities for our user base.
Jonathan Reich: Sure. We continue to invest in all three of those. If I were to describe our monthly active user base, generally speaking, the quality of our user base is better than it was a year ago. We are still iterating to not only see to it that the quality is there, but also to see to it that there is a growth opportunity in that domain, specifically focusing on the well-developed markets where CPMs and disposable income are more accessible. I would conclude by saying growth and the initiatives that we have to unlock that growth is not a static one-time event. It is dynamic. There's not a day that goes by where the team is not exploring new opportunities to unlock growth opportunities for our user base.
Speaker #4: And we are still iterating to not only see to it that the quality is there, but also to see to it that there is a growth opportunity in that domain.
Speaker #4: And specifically focusing on the well-developed markets, where CPMs and disposable income are more accessible. And I would conclude by saying, growth—and the initiatives that we have to unlock that growth—is not a static, one-time event.
Speaker #4: It is dynamic. There's not a day that goes by when the team is not exploring new opportunities to unlock growth for our user base.
Speaker #3: Okay, that makes a lot of sense. Well, thank you for taking my question.
Derek Greenberg: Okay. That makes a lot of sense. Well, thank you for taking my question.
Derek Greenberg: Okay. That makes a lot of sense. Well, thank you for taking my question.
Speaker #4: Sure. Thank you.
Jonathan Reich: Sure. Thank you.
Jonathan Reich: Sure. Thank you.
Speaker #5: Again, if you have a question, please press star, then one. We have no questions in the queue. This concludes our question and answer session and conference call.
Operator: Again, if you have a question, please press star then one. We have no questions in the queue. This concludes our question and answer session and conference call. Thank you for attending today's presentation. You may now disconnect.
Operator: Again, if you have a question, please press star then one. We have no questions in the queue. This concludes our question and answer session and conference call. Thank you for attending today's presentation. You may now disconnect.
