Zedge, Inc. Class B Common Stock

Q3 2021 Earnings Conference Call


spk_0: thank you for your patience ladies and gentlemen please continue your blind your of to begin shortly again we appreciate your patience please continue on line your comfort to begin shortly
spk_1: good afternoon and welcome to the edges third quarter twenty twenty one earnings conference call during management's prepared remarks or participants will be analysts and only mode should you need assistance please signal a conference specialist by pressing starkey followed by zero well after today's presentation by such as management they will be an opportunity to ask questions to ask a question plus per star than one under touchstone phone to withdraw your question please press star than to insert a presentation jonathan reich the edges chief executive officer and he say the jews chief financial officer will discuss the edges financial and operational result for the three month period that ended on april thirtieth twenty twenty one any forward looking statements made during with conference call either in the prepared remarks or the question and answer session whether general or spurs suffolk in nature are subject to risks and uncertainties that may cause actual results to differ materially from those which company and to speak these risks and uncertainties include but are not limited to specific risks and uncertainties disclosed in the report fits edge files periodically with the us securities and exchange commission the edge assumed no obligation either to update any forward looking statements that they have made or may make or to update the factors that may cause actual results to differ materially from those that they forecast please note that this edge earnings release is available on the investor relations page of research website their earnings release as also been filed on a form a keg with the fcc i would now like to turn the conference over to mister jonathan reich
spk_2: date your operator and thank you all for joining us today good afternoon welcome to that is good quarter fiscal year twenty twenty one earnings conference call i'm jonathan right ceo of his age and whitney is our chief financial officer eats side will provide additional insight into or financial performance q three will the next one quarter of that we reported revenue five point three million dollars or second highest quarter in the history of the company he also delivered or fourth consecutive quarter of net income sixth consecutive quarter positive ebitda and seven consecutive quarter of positive cash flow from operations we're very proud to be the key events especially in light of the seasonal me to go business with que three being historically we've mostly from a drop in post year and how they add budgets for those of you there are new to the story that is a leading app developer focusing on mobile phone personalization and entertainment her heritage is really in being one of the leading provider the mobile personalization content focus on offering consumers a rich array of high quality wallpapers video wallpapers ringtone and and notifications out our flagship app that wallpapers and maintains is all that personal identity it acts as a popular vote for self expression for millions seeking mobile phone personalization social content and band the mark the app is rapidly approaching five hundred million organic installs the cross android and ios and outstanding achievement for any at the afghan or it's revenue from a combination battery power housing paid subscriptions and there's a premium marketplace which enables content creators ranging from world class celebrities to emerging artists to display and market their digital content and sell it to our users that is strong third quarter performance is a testament to the ongoing investment we are making in ad operations paid subscriptions and maverick the latter of which was up nearly twenty percent year over year specific to last point the also started see immaterial slow in array of male declining well developed markets which dropped by only one percent in two three delving into paid subscriptions although he benefited from what we considered healthy renewal rates have approximately forty five percent a year to and approximately sixty five percent the year three and the year over year increase remain strong we did not match the level of our prior sequential quarterly increases it's where the function of customer churn rate remained constant on a higher total subscriber numbers combined with lower now and well developed countries where our subscription offering tend to have better traction it is unclear at this time whether the subscription part of our business was actually impacted by seasonality or if it was something else either way we are being pro active in our efforts to reverse this trend particularly and well developed markets until recently we had to product managers overseeing our entire product portfolio zed wallpapers and ringtones zed premium zed plus and shorts we recognize that to better scale we needed to invest in expanding our product management team we waited to pull the trigger on a simple early calendar two thousand twenty one with the completion of the topic management is the migration and now have three dedicated product managers working on our personalization at one focusing on the premium offering another focusing on that plus are paid subscription offering and the third focusing on the edge premium in addition we have a product manager assigned to new initiatives including short it's we believe that the additional resources will allows the scale and execute on the various growth initiatives that we have identified with greater efficiency and eat although early we're starting to see results from the tires most recently with the completion of the overhaul of user accounts a prerequisite for social and community features that will be incrementally introduced later this summer the ability to follow artists and other users create and share collections notify users about new followers and new content and offering an easy to remember handle like zed dot nice forward slash jonathan reich are expected to unlock fundamental user growth furthermore we are going to enhance their each class by bundling in value adds to make it more attractive to a broader cross section of prospective customers and ultimately drive incremental grip finally the newly hired just premium product manager is working on a set of initiatives to expand our premium creator community decrease average revenue per artist optimize and localized pricing make premium content more accessible to consumers introduce new functionality including and f t's or non fungible tokens ensuring that they are easier to use operationally affordable environmentally sustainable and an improvement to our creator couple as a platform apart from this we now have the marketing infrastructure in place from attribution to analytics and all the associated connections to start tapping paid acquisition growth strategies this whole the in an iterative process allowing us to scale based on relax or return on at them i would be remiss if i didn't spend some time updating you about shorts earlier this year we hired a product manager who has been spending the bulk of his time doing foundational work here to understand the user base how they interact with the app what content they like and how they consume it under his watch we introduced in as forty version of short casts high value podcasts of the content we believe that short form fictional content is optimal for smartphone users and at this pace is still in the early stages of maturation we are also beginning to test various pages or acquisition strategy as to compliment existing or dan channels introduce new features and expand our audio catalog or even more encourage that there is a large opportunity here present in light of neighbors recent acquisition of what path for six hundred million dollars and to cows acquisition of radish or four hundred and thirty million dollars last quarter we introduce disciplined in a as part of our growth strategy while we don't have anything to announce at this juncture we have been active in looking at potential target as a reminder er acquisition strategy is to seek out opportunities where we can leverage are large user base expertise monetization know how managing complex platforms outstanding engineering talent and a heh lp balance sheet and closing our first three quarters of the fiscal year have been outstanding and we expect to report contains strong year over year growth and queue for despite a tougher comp as our business turn the corner and to for fiscal twenty twenty based on are strong fiscal year to date performance we are raising our for your fiscal twenty twenty one expectations for revenue growth of ninety five to one hundred percent while maintaining our track record us from profitability and cash flow from operations before handing the call over to eat i would like to thank you are investors for your support i also want to remind everyone that our success is a direct outcome for the outstanding team of talented and dedicated professionals who work it's edge and to go above and beyond to execute our vision thank you now i'm going to turn the call over to he will provide details about our financial performance thank you
spk_3: thank you jonathan i want to start by reminding those on a call that our fiscal year and to light that it hurts
spk_4: additionally last whether we introduced term active sufficient to replace paid such as a magic
spk_3: due to the change in the calculation used by google play that now include a cat oh which is a subject and it's that's that begins when the as from the pain and fail and the three days grace period had ended without payment solution the cannonball whole period last for up to thirty days with the aim to reduce cancellation right moving to the third quarter results monthly active users on now if fine as a number of unique user that opener app to the a lot study they have the period anchorage twenty percent to thirty four point five million during april twenty twenty one on twenty eight on a million during april twenty twenty image market mouth expanded by nearly thirty percent total revenue in the third quarter increased hundred and fifty three percent from last year to five point three million dollars why al growth was extremely impressive record this keep in mind that cute your tony tony is when cp ends balance out so this year we saw the benefit of the we're we are continually doing to pull out an operation
spk_4: and ramming what op ninety eight percent from last year still demonstrating strong grown despite the down net additions
spk_3: it is unclear how much of a slow down in suppression new submission growth was see the now and how much was related to low amount in boiled develop market
spk_4: but with our resident the hires and poor and an issue then we are working to read a salary girl and physical twenty on it too that's payments gotten and value a kid he the that is that totally failed smiling and fact that the well marketplace
spk_3: as to london fifty thousand novel upset the eight percent compared to the year ago quarter
spk_4: and nineteen percent the price of the
spk_3: as jonathan indicated we're investing in growing this offering accept sufferers and a faded than london fifty thousand and the end of the corners and any eighty nine percent increase the over here as you recall when a nice or purchase of section
spk_4: i framed inducer humberts a piece of squish
spk_3: we pay a thirty percent the to google which shows up in our at dna as enlightening expense however if a subscriber with a monthly or annual review the it's a person of the twelve months the google feeds dropped to fifteen percent in two three we continue to see any a second video rate of approximately forty five percent and day and renewal of coming in at sixty five percent which had stanley a consider to be strong performance within the industry
spk_4: on on the average revenue per month the active activism or on our was four point nine cent
spk_3: an increase of hundred and twenty one percent yeah over here driven by a combination of better ever present performers and higher paid sufficient numbers operating martin english of thirty percent versus naked six percent last year reflecting the container called console we have implemented that while still being able to invest and girl net income and entitled the earnings per share with one point nine million dollar and thirteen cent respectively versus a net loss at three hundred thousand dollar and laws for share of the senate's in the prior year
spk_4: abbott shares outstanding for the corner where about fourteen point six million on the full the the law that basis the present in the share with at issue is paula by a pm
spk_3: combine what up and exercises as the stock pay increase set nikolay bout of a pass top months if he had hours took one three million dollars versus break even last year from the liquidated spent on we every man in a strong neck has position with almost not that and yet twenty five million dollars cash and cash equivalent a twenty million ali based on last year and over eleven million dollars to of it the increasing cash on the cute to what's driven by a companies in a positive up than casper of formula and lol and net positive seven million dollars from the ten million dollar eighty hm or open we initiated this quarter
spk_4: south of which occurred and in weighted average price about fifteen knots
spk_3: moving to canada for the for fiscal twenty twenty one
spk_4: and sell at the mention we have increased our top line for expectation to ninety five percent to one hundred percent
spk_3: two for had sedition the have been stronger than two three but also keep in mind that are careful com or be tougher due to the courts judge sectarian that began in cute with twenty
spk_4: also known as that was some key new hires we expect our operating expenses run ray to increase sly be a coupon
spk_3: i hope they each of you remain safe and the look forward to speaking with you again on a next call
spk_4: operator back to you for qnx
spk_5: we will now begin the question and answer session to ask a question in a press start than one on your touchdown phone if you're using a speaker phone please pick up your handset for press on here
spk_6: to withdraw your question please press star and entail
spk_1: at this time apostle possible entirely too as an ally roster
spk_0: your first question is coming from allen clean with max and group
spk_7: your line of i i
spk_8: good afternoon congratulations on continued excellent not execution hum one thing that i'd lots of things from were partners and a quarter but the first thing i wanted to highlight to dig into was strengthen your users and your advertising rates i'm this was supposed to be a seasonal my i'm weaker quarter which is so so what do you attribute to a strain fag you saw in your monthly average users and i'm
spk_9: of our revenue that you were getting for them producer i got them thank you for the compliment then the really play of the team ah and specific few are you know your question ah it in the hard work of are adults team ah
spk_2: who's we focus on optimizing to the city and it's associated with our inventory ah we think that bad it is you know a very very significant part of the work if they continue to our or the time making any to best an on generating
spk_9: a more of from the inventory of and then valve everything from optimizing inventory optimizing the you their experience focusing on twelve like header betting increasingly can see and time so forth on i'll also add that him i a or industry
spk_8: why ppm have been holding up as the economy due to cook enough have question of a doubt i did you know we are benefiting from that as well hope that helps odds of that doesn't end up taking into what he said that your i'm well developed the odd monthly there and may use was on down only one percent could could you go into what what you think was behind that
spk_9: of and maybe like have you been doing with somebody initiatives with the apple ah yes so as you know we are dominant on android has an ongoing improvements that we are making in terms of the overall experience or user experience in the app on his head of him something that we are benefiting from i'm i'm as i indicated in my opponents are going into the summer we have a lot of initiatives focus on our what we expect well result in hot here while grow art the well developed market ah growth ah specific few social on community features personalized the is improving and proof search and recommendations ah and the thing like that marketing automation where we will send push notifications and and so forth to our youth
spk_2: years
spk_9: another will be rolled out incrementally and that as we see our success we will continue to ah go down the path of investing in the ah
spk_10: enhancements that are yielding that success and the the one that are not were translating into
spk_8: ah improve engagement ah well ah you know be turned off accordingly got it if i move on to your subscription ad for a business
spk_9: it it looked to me like that continuing to arm to grow sequentially i am not acts could could you explain a little your comments of what you said that it was a little less than the prior quarter right so outlet five brigade between subscribers and revenue ah you are correct that revenue continue to improve our and that is a function of the new subscribers and then renewals ah from existing subscribers going into your tumor new olds were saying that approximately forty five percent ah but animal subscribers whoa we knew for a second year and then going into their a year now that we've got a couple months of caregiver new was under our belt or saying that approximately sixty five percent have the users that had renewed for a second year or indeed renewing for third year
spk_11: ah i'm as such as the overall revenue hi ah increased even though we did not have a net gain in terms of ah at this hands of a hundred thousand users which has been of the standard in that previous quarters he he want to add anything to that yeah i'll add on this quarter we only had it on forty two thousand lead addition to all pull out subscribe
spk_9: and as jonathan mansion in a huddle up for get bigger and better you need to get neil a give a new spider to said that show so have at your pays goal love it it's it's harder to find new person to offset the council said such that's why that net additional has been in a slow down a bit when compared to a lot and gotta i get food like or you are like have one more keeps wish i had to the pawn in ah my times when looking at calendar year twenty twenty one today we have really made a significant commitment towards and i'm growing our product management team and ah seem to it that we have ah the dedicated product managers focusing on ah you know are various products so he got a dedicated product manager focusing on i'm really i'm ah i'm working on the wall paper a ringtone as we've got a brand new dedicated product manager focusing on that premium are marketplace we have another brand new dedicated product manager coker thing on subscription than what we can do in order to ground of that business over time when the value add them to think that's or and then we have any ah
spk_8: product manager that we've replaced are focusing on new initiatives them at this point in time on that is primarily around shorts although we have other things going on under the hood in terms of you to control product opportunities ah that is also be looking into by that particular product manager
spk_2: thank you in terms of your market marketplace and time you have a lot of initiatives and are going to launch the summer i have two things that i heard you stay say i'm stood out to me as kind of new one was including and f t's and of could you explain maybe how that would work
spk_9: work of would people actually did for them on when your side or have to get they be created there and then second he said that you bike be able to start i'm paid aqua acquisition marketing and and if so what have you think about what that would be targeted for thank you journaling with back to and if he is not thunderbolt falcons ah we've even if he is as being on a valuable utility there will be attractive to hearted that exist in our market it's in our our our a requirement for that if you well are we want to make sure that ah there are for the wall and so far as are getting the and of he out there the artists aren't you know it's is not going to be in a position where every pay so much money to me even if he is how did it if not valuable on number two is that they are sustainable from an environmental perspective and then number three we want to do everything possible to provide for ease of use our and in today's world knitting and and a he for most the complicated it requires having a crit the wall at it requires a lot of know how on and if he sighed were really trying to lower that are for me it's utility one which is ah acceptable to a wide array of it many of whom do not advocate technical know how neat it two minutes that of benefits are in terms of whether or not we wall of the elder a third party sites on remains to be seen ah but we certainly want to make sure that they are are embedded in our our creator platform at turning to your second question about pay his rap edition are we are looking at this ever analytically we want to know that if ah we a market to a particular segment however you define that segment by demographic geography content taste or gender you name it nip we and measure ah the return on assets are and understand i did that user base the that segments generate a positive are alive when taking a look at their ltd their lifetime value so we are have invested in building the infrastructure so that we have a quote unquote all of that those connections on available such thing
spk_2: we all understand from the point of attribution all the way too early
spk_9: ah the customer sign up and then interacting with our product on whether or not that's a segment that we can afford to bring our away the positive are a lot
spk_8: and that will take out your that profits is one where we will proceed on coffee flavor one we fine i'll hopefully and earth segments the make a lot of sense will begin to spend more money on acquiring those segments accordingly ah in tulsa time that we crossed the threshold or without you know finance really you know we can't go beyond this amount of money for this particular segment to that answer your question
spk_9: yeah that's great i can i just had a few or housekeeping things and i'm i'm done one is he so you've you've made some hires some that that should be positive on future growth is is to wait until
spk_12: i'm guessing that not all the cost of them was in this current quarter or is this current quarter a good run rate or is it's gonna jump up from that level and any color on that yeah
spk_11: what somebody it some of these ads on you know we're a brand new and we're not on what we're not part of our team this quarter ah i'm so i think that you will see some change but you know on the flipside of you know that there have been from the all
spk_13: that have had a good at the company so it's really a bouncing game he wanted provide a little bit of hello there
spk_4: yeah
spk_11: ah
spk_14: ah on a cellphone fallen nine months till april thirtieth
spk_15: put on both
spk_16: would hang wallpaper into the airport on manager and all six of the dirt a cannonball two to three
spk_17: and he'll come to run right a i mean we're not done with the yeah
spk_11: a twofold the know another to
spk_18: put on manager
spk_8: so republican if you're looking for runway the parliament factor into more and more at oh that's great and then just going back to seasonality hat
spk_19: remind us i know you talked about it a little bit but you did say that
spk_8: the july quarter which is the next quarters typically
spk_9: higher on an absolute bases compared to ah the that the quarter you just had like but you then i heard you say think that but your comparisons are getting tougher like is there any reason that makes you think that there's something about that door to something about the seasonality of how to how to think about the fourth quarter versus the third or for just in general yeah it's it's it's not funny too early in the quarter for the able to provide a in l a are educated on your answer their ah that
spk_8: turning back to you know cute kitty versus you through the as as you know a key to is november december january so typically we benefit from end of your as fan or and manner there that ah season all the fine art in the february march full time frame were advised advocates are cut back ah and of i'm we then it will begin to see that ah
spk_20: two for across while the are slightly above yep have three ah but i think ah that is historical with all of the changes that we have going on and yeah right now it's it's it's something that ah we're not in position to for
spk_21: vi accurate guidance other than to say that ah overall in other businesses holding up nicely
spk_11: great thank you my last question just to balance sheet or it looks like you raised around seven point four million and equity during the quarter i'm guessing that it was from your from the ten million eight yeah mario are you able to provide where that stands today and maybe where the share counties as a it's probably your q i'm not sure if you q came out yet thank you he wanted rough that
spk_8: yeah
spk_22: so we
spk_0: we raise oh god seven point four hand which type of two point six or seven lap her we expect to country that ten million are operating within the ghost stuff

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