Zedge : Fiscal Q3 2021 Earnings Call Transcript

• Thank you, operator. And thank you all for joining us 2 today.

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• Good afternoon. Welcome to Zedge's third-quarter5 fiscal year 2021 earnings conference call. I'm Jonathan
  6 Reich, CEO of Zedge, and with me is our Chief Financial 7 Officer, Yi Tsai, who will provide additional insight into 8 our financial performance.

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1. Q3 was an excellent quarter for Zedge. We reported
2. revenue of $5.3 million, our second-highest quarter in
3. the history of the company. We also delivered our 4th
4. consecutive quarter of net income, 6th consecutive
5. quarter of positive EBITDA and 7th consecutive quarter of
6. positive cash flow from operations. We're very proud of
7. these achievements, especially in light of the seasonal
8. nature of our business, with Q3 being historically weak,
9. mostly from a drop in post-year-end holiday ad budgets.

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1. For those of you that are newer to the story, Zedge
2. is a leading app developer focusing on mobile phone
3. personalization and entertainment. Our heritage is
4. rooted in being one of the leading providers of mobile
5. personalization content, focused on offering consumers a
6. rich array of high-quality wallpapers, video wallpapers,
7. ringtones, and notification sounds. Our flagship app,
8. Zedge Wallpapers and Ringtones is all about personal
9. identity. It acts as a popular hub for self-expression for
10. millions seeking mobile phone personalization, social
11. content, and fandom art. The app is rapidly approaching
12. 500 million organic installs, across Android and iOS, an
13. outstanding achievement for any app. The app generates
14. revenue from a combination of advertising, paid
15. subscriptions, and our Zedge Premium marketplace,
16. which enables content creators, ranging from world-class

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1. celebrities to emerging artists, to display and market
2. their digital content and sell it to our users.

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1. Zedge's strong third-quarter performance is a
2. testament to the ongoing investments we are making in
3. ad operations, paid subscriptions, and MAU growth - the
4. latter of which was up nearly 20%, year-over-year.
5. Specific to the last point, we also started seeing a
6. material slowdown in the rate of MAU decline in well-
7. developed markets, which dropped by only 1% in Q3.

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1. Delving into paid subscriptions, although we
2. benefitted from what we consider healthy renewal rates
3. of ~45% in year two and ~65% in year three, and the
4. year-over-yearincrease remained strong, we did not
5. match the level of our prior sequential quarterly
6. increases. This was a function of customer churn rate
7. remaining constant on a higher total subscriber number,

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1. combined with lower MAU in well-developed countries
2. where our subscription offering tends to have better
3. traction. It is unclear at this time whether the
4. subscription part of our business was actually impacted
5. by seasonality or if it was something else. Either way, we
6. are being proactive in our efforts to reverse the trend,
7. particularly in well-developed markets. Until recently, we
8. had two product managers overseeing our entire product
9. portfolio - Zedge Wallpapers and Ringtones, Zedge
10. Premium, Zedge Plus, and Shortz. We recognized that, to
11. better scale, we needed to invest in expanding our
12. product management team. We waited to pull the trigger
13. on this until early calendar 2021 with the completion of
14. the content management system migration and now
15. have three dedicated product managers working on our
16. personalization app - one focusing on the freemium
17. offering, another focusing on Zedge+, our paid
18. subscription offering, and the third focusing on Zedge

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1. Premium. In addition, we have a product manager
2. assigned to new initiatives, including Shortz. We believe
3. that the additional resources will allow us to scale and
4. execute on the various growth initiatives that we have
5. identified, with greater efficiency and ease.

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1. Although early, we're starting to see results from
2. these hires, most recently with the completion of the
3. overhaul of user accounts, a pre-requisite for social and
4. community features that will be incrementally
5. introduced later this summer. The ability to follow artists
6. and other users, create and share collections, notify
7. users about new followers and new content, and offering
8. an easy-to-remember handle like
9. zedge.me/jonathanreich are expected to unlock
10. fundamental user growth. Furthermore, we are going to
11. enhance Zedge+ by bundling in value-adds to make it
12. more attractive to a broader cross-section of prospective

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